Chocolate maker Lindt & Sprüngli expects sales to slow in the second half of its financial year, with chief financial officer Martin Hug telling an analyst call that the lifting of COVID restrictions is likely to curb the impressive growth seen in the chocolate market over the past year.
Hug's assessment follows a bumper first-half period for the group, which saw organic sales rise by 17.4% year-on-year to CHF 1.8 billion (€1.67 billion), and operating profit rise to CHF 138.8 million (compared to CHF 17.1 million the previous year).
Slowdown In At-Home Consumption
"We have to bear in mind that we have had really fast-growing chocolate markets in the first six months or actually in the last 12 months, [which] started roughly in the second half of 2020," Hug told a conference call. "Therefore, I really expect to see a slowdown in the chocolate markets, which will impact everybody.
"We have seen the chocolate market in the US growing between 6% and 8% over the last 12 months. I think this will slow down to low single digit or even come to a standstill. Therefore, we will have an impact there, I think."
As he explained, as consumers "go out more again to restaurants" following the lifting of restrictions, in-home consumption will drop, however he still expects Lindt & Sprüngli to outperform its performance in the corresponding period in 2019.
"I expect the second half to be slightly higher than the second half of 2019, but just really low single digit," he added.
In terms of the performance in the first half of its financial year, Lindt said that its Lindor and Excellence brands were the main sales drivers in the period, recording 'solid growth', while it was pleased to see a recovery in the Easter market, which 'exceeded expectations'.
Its Global Retail business segment, which was hard hit by the pandemic, also showed signs of recovery, growing by double digits compared to the previous year (although down on 2019), while its Duty Free arm continues to be impacted by restrictions in global air travel.
Regional Sales Growth
Lindt & Sprüngli, which recently welcomed tennis star Roger Federer to its headquarters to inaugurate a new chocolate fountain, reported double-digit sales growth in all three regions in which it operates; Europe saw sales rise by 16.4%, North America was up 18.8% and Rest of the World rose by 18.0%.
In terms of the performance of its Europe division specifically, it cited a'particularly noteworthy' performance in Germany, France, the UK and Italy, while in its home market of Switzerland, it benefitted from a new partnership agreement with Migros.
As for the remainder of the year, "everything depends on how the pandemic develops," Hug explained. "Currently, the most important assumptions in our 2021 forecast are that overall chocolate markets growth will slow to low single digits; there will be no major new COVID-19 waves that require further widespread lockdowns, and Travel Retail gradually gathers momentum; and the majority of our own retail stores will remain open from now until the end of the year, with an ongoing recovery in like-for-like store sales growth."
He also noted that the group expects overall material costs to be slightly higher in 2022, compared to 2021, driven by a small increase in cocoa costs and investments in sustainability measures.
"Based on our market expectations, and including the living income differential, we assume that cocoa bean prices for '21-'22 crop will increase only slightly, while cocoa butter prices in '22 may be slightly below '21 levels," he said.
© 2021 European Supermarket Magazine. Article by Stephen Wynne-Jones. For more Supply Chain news, click here. Click subscribe to sign up to ESM: European Supermarket Magazine.
