Swiss chocolate heavyweight Lindt & Sprüngli has said it will take further pricing actions this year to counteract record high costs for cocoa beans.
But, in a post-results media conference today (5 March), it predicted that the price hike would not have a negative impact on volumes.
In its fiscal year 2023, it recorded sales of Sfr5.20bn ($5.87bn), up 10.3% year-on-year, while net income was up 17.9% at Sfr671.4m.
But Lindt admitted that “most of the growth” is attributable to price increases. It put prices up by 10.1% in 2023.
CEO Adalbert Lechner told journalists that the hikes were inevitable because of the operating environment and had largely been accepted by consumers.
“We have the highest ever cocoa bean prices right now,” he said, pointing to a disease affecting trees in west Africa and inclement weather there resulting in a weaker crop as contributory factors.
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By GlobalData
“We have a good hedging strategy but there have also been price increases in many market to offset inflation,” he added.
He said the Lindor brand manufacturer’s volumes declined in the first half of the year but were flat over the year.
“Consumers got used to new pricing levels throughout the year,” he said.
Quizzed on likely price hikes this year, Lechner said they would be mid-single digit and being “substantially lower” than 2023. Lindt is expecting them to have less impact on volume.
Asked whether putting prices up again risked damaging consumer sentiment, Lechner said: “We are always cautious when it comes to price increases but our brands are very resilient. They are strong and have a loyal customer base. We don’t think we are overdoing it with price increases.”
Lechner said no decisions have been made yet as to the level of price increases in 2025.
As expected, Europe was the region with the highest sales for Lindt at Sfr2.41bn, up from Sfr2.30bn 12 months previously, while its North American segment increased sales to Sfr2.11bn from Sfr2.03bn in the previous year.
In the rest of the world segment, sales increased to Sfr0.68bn from Sfr0.65bn in the year prior, with Lindt highlighting its performance in China.
“Following the easing of Covid measures the Chinese economy recovered slowly, nevertheless, our business achieved a high single-digit growth, outperforming the stagnating Chinese chocolate market,” it said.
The company’s margins increased +60bps year-on-year to 15.6%, slightly ahead of earlier guidance.
Analysts at Bernstein commented: “The resilience in Lindt’s margin demonstrates their remarkable pricing power in the face of recent dramatic cocoa price inflation. This is exactly what investors want to see from a high-quality staples business.”
Lindt & Sprüngli confirmed its target for organic growth of 6% to 8% for this year.
A number of food giants have indicated high cocoa prices are likely to affect their pricing strategies for the year, such as Orkla, Unilever, and Mondelez.
