Lindt & Sprüngli is set to implement double-digit price increases in 2025, building on last year’s 6.3% hike initiated by the premium chocolate maker.
During the presentation of Lindt’s 2024 financial results on March 4, CEO Dr. Adalbert Lechner refrained from disclosing specific figures regarding cocoa-linked price increases but acknowledged that the rise would be “significant.”
Although these adjustments may burden consumer wallets, Lechner remains optimistic about sustained demand. He stresses that consumers will continue to indulge in premium chocolate, particularly since competitors will likely follow suit to safeguard profit margins.
“In the last three years, we increased prices combined by 30% and our volume was stable or even slightly growing. This demonstrates our strong brands, resilient consumers, and robust business model,” Lechner stated during the briefing.
“While growth in volume has slightly decreased, we are still able to expand the top line.”
In light of the expected pricing advantages, Lindt raised its organic growth outlook for 2025 to 7-9%, up from the previous 6-8%. Management reaffirmed its medium- to long-term targets at 6-8%.
The operating profit margin (EBIT) is projected to increase by 20-40 basis points over the upcoming fiscal year, with similar growth predicted for the following two target periods.
“If you give away too much margin now, when cocoa prices are increasing, you will never regain it when they decline. This would leave us justifying high prices to our trade partners,” Lechner explained.
Price Pressures
Despite a decline from the record peaks in December, cocoa bean prices remain historically elevated.
According to Finance Chief Martin Hug, Lindt’s material costs increased by Sfr200 million ($225 million) last year due to higher cocoa prices, raising the cost ratio from 33% to 35%.
“In the future, chocolate will be more expensive compared to two or three years ago. This applies not just to Lindt chocolate but to all chocolate,” Hug asserted.
In terms of current pricing, the rate is about 6,000 pounds per tonne, roughly three times higher than the long-term average.
Organic growth decelerated in 2024 to 7.8%, resulting in top-line sales of Sfr5.47 billion, compared to growth rates of 10.3% and 10.8% in the prior two years. While the volume/mix was 1.5%, Lindt experienced a loss in volume due to pricing strategies.
The EBIT margin increased by 60 basis points to reach 16.2%.
Lechner noted, “The global chocolate market has reacted to heavy price increases. We have observed a mid-single-digit volume decline while experiencing a slight value increase in the market.”
“Private label brands emerged as significant beneficiaries. Customers burdened by inflation migrated towards private label options, while others opting for a more mindful indulgence shifted towards premium brands like Lindt.”
Germany, as Lindt’s largest business segment in Europe, and Australia experienced some backlash. Lechner reported a “substantial shift to hard discounters” in Germany last year, where Lindt does not compete.
In Australia, the situation was challenging as Lindt’s largest customer “did not want to accept our price increase.” Fortunately, negotiations eventually resolved the issue, albeit not swiftly enough to avoid adverse impacts.
Growth also slowed in North America, Lindt’s second-largest market, registering just 5% compared to 11% in the previous year.
Lechner described the performance as “disappointing,” attributing it to an “all-time low” in consumer sentiment.
He noted, “Currently, we see the weakest chocolate market in the US, which does not provide a favorable environment for substantial growth.”
With tariffs affecting Canada and Mexico, Lechner indicated that Lindt would experience negligible impact. However, if import tax penalties extended to Europe, the business could see some repercussions.
With five factories in the US, Lechner noted that 95% of Lindt’s local sales volumes are also produced domestically.
“We do not operate any factories in Canada or Mexico, so the recent tariffs will not directly impact our business,” he affirmed.
Canada presents a different scenario; therefore, Lindt has enacted contingency measures.
“While US tariffs have minimal impact, tariffs in Canada will affect us. We have increased inventory as half of our Canadian sales volume is sourced from the US, while the other half comes from Europe,” Lechner elaborated.
“We have heightened inventories for US-sourced products and simultaneously prepared to transfer volumes sourced from the US to Europe.”