Insights

Globally, chocolate is a large, mature industry with several mainstream chocolate manufacturers. In the previous year, over 8 million tonnes of chocolates were consumed globally, equivalent to about 2.2 pounds of chocolate per person on our planet. The broader chocolate market can be segmented into three categories: mainstream, premium, and fine chocolates. Whereas the mainstream chocolate market is relatively stagnant, growing at very low single-digit rates, the premium segment continues to grow at a healthy clip. Lindt dominates this segment with a history spanning over the past 175 years. The premium segment accounts for about 15% of the global chocolate market, with Lindt’s market share estimated at 30%.

The company’s mission is to ‘enchant the world with chocolate,’ emphasizing the importance it places on delighting consumers with its products. Not surprisingly, it considers the quality of its products as the most valuable asset.

A critical element of ensuring the superior quality of its chocolates is the quality of raw materials. While mainstream chocolate products have higher sugar and vegetable oils composition, Lindt’s chocolates tend to have a higher cocoa content. To ensure the quality and consistency of its products, Lindt is one of the few major manufacturers to produce chocolate from “bean to bar,” i.e., from sourcing high-quality cocoa beans down to refining cocoa mass into the final premium product.

The superior quality of Lindt’s products aligns well with an increasing preference of consumers for healthier products. Indeed, the company has seen an increased demand for its high-quality chocolates with high cocoa content. In its continued efforts to delight its consumers, Lindt has continued to innovate and introduce new premium products catering to changing preferences. Examples include a new Hello Vegan range made from purely plant-based ingredients and Excellence Cocoa Pure, made from 100% cocoa fruit with no added sugar.

Additionally, to improve its reach to consumers, Lindt has put an extra focus on its own retail outlets (stores/cafes).

The company’s superior product positioning and its ability to stay relevant in the minds of consumers are represented in its volume growth. Whereas the overall chocolate market has seen a sub-optimal 1% volume growth over the past decade, Lindt has been able to grow its volumes at an average rate of 5% plus. The company continues to benefit from premiumization as consumers trade-up towards high-quality, premium chocolates.

At the same time, it possesses a relatively strong pricing power which is reflected in the significant price premium it commands over mainstream chocolate brands and its ability to raise prices in line with inflation and peers.

Source: Company data, MAEG

With improving per-capita income, there is a tendency on the part of the consumer to upgrade towards premium chocolates. Accordingly, the emerging market consumer should provide an important tailwind for Lindt’s business over decades to come.