Lindt & Sprüngli plans double-digit price increases in 2025 on top of the 6.3% hike the premium chocolate maker initiated last year.
CEO Dr Adalbert Lechner, presenting Lindt’s 2024 financial results today (4 March), declined to put an actual figure on the cocoa-linked price increases in store but admitted the rise was “significant”.
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While that might put pressure on consumer wallets, Lechner is confident demand will hold up as people continue to seek out indulgence, especially in the premium chocolate category, and by the fact competitors will be forced to take the same route to protect margins.
“In the last three years, we increased prices combined by 30% and our volume was stable or even slightly growing. So it demonstrates that we have strong brands, resilient consumers and brands and, in addition, we have such a strong business model to grow,” Lechner told journalists today.
“Of course, the growth came slightly down in volume, but we are still able to grow the top line.”
To reflect the anticipated pricing benefit, Lindt raised its organic growth outlook today to 7-9% for 2025 from 6-8% previously. Management kept the medium- to long-term targets at 6–8%.
The operating profit margin (EBIT) is expected to rise 20-40 basis points over the new fiscal year, and by the same magnitude for the two target periods.
“We believe if you give away too much margin now, when cocoa prices are increasing, you will never get it back when they are declining, because then we will stand there in front of our trade partners and have to justify why prices are high,” Lechner explained.
Price pains
Cocoa bean prices remain historically high even though they have come off the record peaks reached in December.
Finance chief Martin Hug said today that Lindt’s material costs went up by Sfr200m ($225m) last year as a result of paying more for cocoa, raising the cost ratio to 35% from 33%.
“Chocolate in the future will be more expensive than it has been two or three years ago. That’s not just Lindt chocolate, that’s chocolate in general,” Hug said.
“Currently, the relevant future months for us is about 6,000 pounds per tonne, which is more or less three times higher than it has been in the long term.”
Organic growth slowed in 2024 to 7.8%, giving a top-line sales result of Sfr5.47bn, from a 10.3% and 10.8% pace in the previous two years. Volume/mix was 1.5% but Lindt still lost volume to prices.
The EBIT margin climbed 60 basis points to 16.2%.
Lechner added: “The global chocolate market reacted to the heavy price increases that had to be implemented. Due to the spiking cocoa price, we saw a volume decline in the mid-single digits, and saw in the same area, a slight value increase.
“Private label was one of the big winners in the market. Those customers who were really burdened by inflation and were not prepared to pay the higher prices migrated partly to the private-label products, and those who reduced their consumption and went for a more conscious and mindful indulgence migrated more to premium brands like Lindt.”
There was some backlash, however in Germany, falling within Lindt’s largest business segment in Europe, and further afield in Australia.
Lechner said there was a “substantial shift to hard discounters” in Germany last year, an area in which Lindt does not play.
And in Australia, where Lindt generated sales of Sfr720m, the company “had issues with our biggest customer” as that customer “did not want to accept our price increase”, the CEO said. But the spat was eventually resolved through negotiation but not soon enough to avoid an impact.
Growth also slowed in North America, Lindt’s second-largest market, coming in at 5% versus 11% in the previous 12 months.
Lechner described the performance as “disappointing” linked to consumer sentiment drooping to an “all-time low”.
He added: “At the moment, we see the weakest chocolate market in the US. And of course, that’s not a good precondition to grow substantially in this market.”
As Trump’s tariffs kick in for Canada and Mexico, Lechner said the impact on Lindt would be negligible but the business would see some form of impact if the import tax penalties spread to Europe.
With five factories in the US, Lechner said 95% of Lindt’s sales volumes garnered locally are also produced locally.
“We don’t run a single factory in Canada or in Mexico, so the tariffs that were announced today or yesterday will not have a direct impact on our business.”
Canada is, however, a slightly different ball game but Lindt has taken contingency measures.
“Whilst the tariffs in the US have a minor impact, the tariffs in Canada will have an impact. [But] we have increased our inventory because in fact, half of the volume that we sell in Canada is sourced from the US, and half of it is sourced from Europe,” Lechner explained.
“We have increased inventories from the products that we source from the US, and at the same time, we prepare to transfer the volumes that are sourced from the US to Europe.”
