Rising costs squeeze consumer interest in Lindt Swiss chocolates
In the world of chocolate, two of the leading companies, Lindt and Hershey, have faced a significant hurdle: a 15.8% price hike. The primary catalyst behind this increase was an unprecedented surge in cocoa prices, which more than doubled over the past two years. This dramatic rise was due to supply challenges in West African cocoa-producing countries like Ghana and the Ivory Coast, which together supply over 70% of the world's cocoa.
The higher cocoa prices have put pressure on these companies. While some costs were mitigated through long-term contracts, a large portion was passed on to consumers in the form of price increases. For instance, Lindt's CEO admitted that they had to implement a 15.8% price hike, and Hershey announced plans for low double-digit price increases in the U.S. market.
Despite a 4.6% decline in sales volumes, the price increases helped offset the higher input costs. In the first half of the year, Lindt's revenues still rose by 9% to 2.4 billion francs, albeit with a 13.3% decrease in net profit to 189 million francs.
The impact on revenue and net profit was mixed. While revenue likely increased or was at least protected by the price hikes, profitability suffered due to the much higher cocoa costs that outpaced price increases and other mitigating strategies. In fact, Hershey projected its earnings per share to decline significantly, down in the high 40% range, in 2025.
Adalbert Lechner, the chief executive, remains optimistic, emphasising the company's resilience in a challenging market. To combat the rising cocoa costs, the company has implemented strategies such as product innovation and cost-cutting efforts.
Moreover, the company's sales growth, when adjusted for changing currency values, was 11.2%. This impressive growth has led to a revised sales growth target that is higher than the previous range of 7 to 9%. Additionally, the company has increased its target for organic sales growth to 9 to 11%.
In conclusion, the main contributors to the price hike were soaring cocoa costs driven by supply-side disruptions in West Africa. The volume decline reflected some consumer resistance to higher prices, but increased prices helped sustain revenue. Nevertheless, net profit was negatively impacted, with significant earnings declines expected despite these measures.
In the finance world, the increased cocoa prices and subsequent price hikes from leading chocolatiers, such as Lindt and Hershey, have influenced both consumers' lifestyle and food-and-drink choices, as well affected the business strategies of these companies. The higher prices have led to a mixed impact on revenue and net profit, with some companies experiencing modest revenue growth despite volume declines, but also significant drops in net profit due to outpacing cocoa costs.
