January 21, 2008

Lindt & Spruengli: Premium Positioning Driving Sales Growth

A 14% rise in sales is expected to be announced by Lindt & Spruengli on January 22, 2008, along with organic growth of between 6% and 8%. The Swiss chocolate company has continued to grow sales, despite growing consumer interest in adopting healthier lifestyles. Lindt's success can, in part, be attributed to its premium positioning, but it will, however, face fresh challenges in 2008.

Lindt & Spruengli is expected to announce a 14% increase in annual sales to almost CHF3 billion ($2.7 million) for 2007, while organic growth for the company was estimated at between 6% and 8% over the same period. Lindt has continued to increase its sales, despite difficult market conditions in the key markets of the US and the UK.

Furthermore, chocolate does not appear to fit with the consumer shift towards healthier foods. However, consumers are continuing to live a 'debits-and-credits' lifestyle. For example, chocolate will often be purchased as a reward or treat for a visit to the gym or a consumers' involvement in any other healthy activities. This attitude has allowed Lindt to continue to grow its business.

The company has undoubtedly profited from recent claims that the consumption of dark chocolate provides certain health benefits. Studies have suggested that the relatively high concentration of flavanols in dark chocolate could prove beneficial to health, with the anti-oxidant properties of flavanols touted as being able to lower blood pressure and decrease the risk of diabetes.

The premium aspect of Lindt's chocolate has also proved to be a good selling point for the company. Consumers are trading up across several categories as the premiumization trend takes hold and this has spread to chocolate. Dark chocolate has long been associated with premium products in this field, and this has remained Lindt's prime focus. The company has also capitalized on growing consumer demand for more exotic and unique flavors, with the inclusion of flavors such as chili, grappa and saffron in its chocolate offerings.

Shares in Lindt had dropped around 15% in recent months amid fears of a US and global recession. In addition, while the company continues to post healthy sales figures, the escalating cost of raw materials is set to raise prices across the market. Lindt has so far been successful in bringing premium chocolate to the UK and the US, but will need to retain its premium status in order to maintain growth.