You are on page 1of 15

Chocolate Confectionery

I Table of Contents I Table of Contents 2 II List of Figures 3 III List of Abbreviations 4 1 Executive Summary 5 2 Macro Analysis of the Confectionery Industry 7 3 PESTEL Analysis of the Confectionery Industry 9 3.1 Analysis 9 3.2 Conclusion 12 4 Porter Five Forces Analysis 15 5 Industry Life Cycle and Industry Dynamics 18 6 Lindt & Spruengli Company Overview 22 7 Business System 24 7.1 Resource Base of Lindt & Spruengli 24 7.2 Activity System (Value Chain) of Lindt & Spruengli 26 7.3 Product Offering 28 7.4 Lindts positioning in comparison to Competitors 33 8 Organizational Structure 34 8.1 Organisational Process 35 8.2 Organisational Culture 36 9 SWOT Analysis 37 10 Recommendations 38 10.1 Exposing the Corporate Social Responsibility 38 10.2 Product Development to meet upcoming consumption trends 38 10.3 Market penetration in Spain 40 10.4 Penetration of Emerging Markets 41 10.4.1 Asia Pacific 41 10.5 Entering new Segments 43 10.6 Pushing profitable Product Lines 45 11 Bibliography 47 11.1 Books 47 11.2 Documents from Databases 48

11.3 Journals 50 11.4 Websites 51 II List of Figures Figure 1: Confectionery industry segmentation 5 Figure 2: Market value of the confectionery market in the period 2004-2009 and the expected growth until 2013 6 Figure 3: Stage of industry life cycle mature markets (Western Europe, North America) and immature markets (Middle East and Africa, Eastern Europe, India, China, Russia) 10 Figure 4: Growth rate of the global confectionery sales by region in the period 11 2007/2008 and forecast for the period 2008-2013. 11 Figure 5: Global confectionery market share by value 12 Figure 6: Strategic groups of the confectionery industry 13 Figure 7: Sales in million CHF and change in % in the period 2005-2008 14 Figure 8: Resource Base of Lindt & Spruengli 15 Figure 9: Value Chain of Lindt & Spruengli 16 Figure 10: Product Offering and Brand Structure of Lindt & Spruengli 19 Figure 11: Segmentation by product categories . 19 Figure 12: Balanced Split of Markets 20 Figure 13: Sales in Western Europe in 2007 20 Figure 14: Sales in Asia Pacific in 2007 21 Figure 15: Sales in Eastern Europe in 2007 21 Figure 16: Organisational Structure of Lindt & Spruengli 21 Figure 17: Subsidiaries held directly by Chocoladefabriken Lindt & Sprungli AG 23 Figure 18: Core features of Lindts Organisational Culture 23 III List of Abbreviations B2B Business to Business B2C Business to Customer BoD Board of Directors BRIC Brazil, Russia, India, China CAGR Compound annual growth rate CSR Corporate Social Responsibility e.g. for example FMCG Fast Moving Consumer Goods

GDP Gross Domestic Product M&A Mergers and Acquisitions p. page R&D Research and Development US; USA United States of America UK United Kingdom 1 Executive Summary The Chocolate Confectionery Industry accounts for 49% in the entire confectionery industry. It has reached a total value of $127.9 billion and is anticipated to reach $147.7 billion by the end of 2013. (Figure 1, Datamonitor, 2009 p. 13) The political and legal factors restrict the smooth sales by increasing unavoidable barriers through law and regulation. Environmental Factors comprise of the flow of the sugar supply, social responsibility and the rise of the demand of raw materials could hinder the sales. Economic and socio-cultural factors both have an impact, globally and regionally. Currency Inflation, Unfavourable Currency rates, health of the customers, current financial crisis are all dynamics of these factors. The analysis of the five forces that drive fierce competition in the Global Confectionery Market is deliberated and focussed on. The buyer and supplier power, new entries in the industry, threat of substitutes and the degree of rivalry within the industry are all closely examined. (Euromonitor, 2009) The dynamics and the life cycle of the industry is both scrutinized to check on the companys growth, internationalisation and diversification. It is also noticed that sales volume is of utmost importance as the profit margins are low. The recent growth is perceived to be in the emerging countries. (Candyindustry, 2009 p.15). An overview of Lindt & Spruengli, a Swiss premium chocolate manufacturer clarifies that the company has performed above average, even though the chocolate industry was affected by the economic downturn. The Corporate Social Responsibility has added value to the entire value chain. The company possesses complete in-house expertise and control of every step in the production. The company has modified many ways to cut on input costs, transport cost etc. Lindt offers premium chocolate and thus has relatively high prices than that of its competitors such as Nestle, Mars etc. The group is increasing and diversifying their product portfolio and spreading vastly among 100 countries through retailers and outlets, main markets being Western Europe and then North America. A close examination of Lindts positioning in comparison to its competitors is done on the basis of price, features, image, distribution, quality and bundling. The organisational structure clearly shows the company as a decentralized one, having a wide span of control. The Board of Directors and Group Management are the 2 governing bodies; however decision-making process involves employees and managers as well. The organisational process and culture is also closely examined. SWOT analysis illustrated the highlights and potency, drawbacks and flaws, prospects and hazards that the company possesses and that it has to face. Finally, we also illustrated a few recommendations which include exposing the CSR, development of the product to meet up with upcoming consumption, penetrating in Spain and emerging markets (such as Asia

Pacific, Eastern Europe and Latin America), entering the lower segment, acquiring competitors (such as Godiva) and pushing the profitable product lines, that in our opinion will raise the slate of the company. 2 Macro Analysis of the Confectionery Industry The confectionery industry is a segment of the food industry. It consists of chocolate, gum, cereal bars and sugar confectionery. Chocolate confectionery is the biggest confectionery market amounting for 49% of the whole industry (Figure 1, Datamonitor, 2009 p. 13). Confectionery products are seen as Fast Moving Consumer Goods (FMCG). Figure 1: Confectionery industry segmentation (Euromonitor International, 2009) The global confectionery industry has grown constantly since 2004 with a compound annual growth rate (CAGR) of 3% and reached a total value of $127.9 billion in 2008 (Datamonitor, 2009 p. 2). Owing to the worldwide recession growth rate forecasts for the industry have been adjusted downwards (Euromonitor, 2009). The market value is anticipated to amount $147.7 billion by the end of 2013 (Figure 2; Datamonitor, 2009 p. 7). Market volume has risen by 2.4% reaching a total volume of 12.8 billion kilograms in 2008 and will amount 14.3 billion kilograms by 2013 (Figure 3; Datamonitor, 2009 p. 8). Figure 2: Market value of the confectionery market in the period 2004-2009 and the expected growth until 2013 (Datamonitor, 2009 p. 9). 3 PESTEL Analysis of the Confectionery Industry 3.1 Analysis 3.2 Conclusion Changing consumer needs and behaviour in some world markets are key drivers that will have the highest impact on confectionery industry in future. Child and general obesity and the increasing customer health awareness are pushing the consumption habits of Western European and North American customers rather towards healthy indulgence of confectionery items and away from convenience consumption of big quantities. Customers tend to consume confectionery goods that are either high in quality, claim to be healthful (probiotic dark chocolate) or have functional value (teeth whitening gum). But also emerging markets as e.g. Russia are increasingly adopting this trend. Premium, organic and fair trade confectionery are steadily getting en vogue in Western Europe and North America. The organic and fair trade niches are expected to grow and to gain importance amongst the manufacturers. This trend is not prevalent everywhere since some developing markets as India, Latin America or Asia Pacific still put attributes like brand awareness, low price and quantity above healthiness or fair trade. Another factor for changing consumer behaviour is the current economic downturn that makes people cut back from non-essential food items, become more price sensitive and rather stick to inexpensive products than to premium ones. Some markets as e.g. Russia or Ukraine are additionally facing inflation problems, which lead to much higher prices on imported FMCG. In terms of demographic drivers, declining birth rates in developed countries are a growing problem, as children are one of the most important target groups for confectionery companies. This might affect the industry in a long-term.

Regulations on advertisement aimed at children make the targeting even harder. Also schools and supermarkets in some countries are forced to ban confectionery goods from shelves reachable for children or to replace lunch box confectionery by other healthier alternatives. Environmental and technological key drivers of the confectionery industry are often linked together since the debate on sustainability and eco-friendly production is an up to date topic. New technologies become increasingly important in terms of the innovation and development of new products that meet current consumer needs. The combination of functional food, organic trends, fair-trade products generated by using new technologies could be helpful for manufacturers who need to differentiate themselves in future. Overall economic situation is still tense, since major developed countries achieved negative GDP in 2009 (Figure 3; Euromonitor, 2009a). Solely India and China could cope relatively well with the situation having a positive GDP. The confectionery industry is mainly affected by this crisis in terms of declining customer confidence and thus under-performance of outlets and sales that in turn hamper the industry. Figure 3: Global Economy in 2009 (Euromonitor, 2009a) 4 Porter Five Forces Analysis 5 Industry Life Cycle and Industry Dynamics The confectionery market is fragmented since there are many small and mid-size companies (64%; Figure 4) and a few relatively big players (36%) competeng fiercely for market share and customer attention. The current acquisition of Cadbury by Kraft and the takeover of Wrigley by Mars are only two examples for the current market consolidation. Companies seek growth, internationalisation and diversification by acquiring other companies (Financial Times Deutschland, 2010). Since confectionery goods have usually low profit margins, sales volume is important. Boosting margins achieving economies of scale and hedging risks are thus important reasons for M&A actions (Euromonitor, 2009). For smaller, regionally acting manufacturers this development means a constant threat of being taken over by big globally acting companies who seek to improve their market share and to consolidate their overall position within the industry (Ibisworld, 2010). Figure 4: Global confectionery market share by value (Datamonitor, 2009) Although Western Europe and North America are still the largest marketplaces in terms of confectionary sales as they claim 55% of the worldwide retail value among them (Euromonitor, 2009), the confectionery industry here is considered as more mature owing to the ongoing market consolidation (Ibisworld, 2010). The maturity of these markets is indicated by the huge variety of products while customers still keep demanding new products, as well as by the declining sales growth rate (Datamonitor, 2009a). Undeniable is also the impact of the financial crisis that result in people buying less than under normal economical circumstances (Euromonitor, 2009). However, these markets will keep growing but at a very low rate (Figure 5; Euromonitor, 2009) primarily by exploiting niche markets as e.g. fair trade and organic or premium chocolate (Candyindustry, 2009 p.15). Figure 5: Growth rate of the global confectionery sales by region in the period 2007/2008 and forecast for the period 2008-2013. Most of the recent growth of the confectionery industry takes place in developing countries and emerging regions as the BRIC countries, Asia Pacific and Eastern Europe, who have

extended their market share of worldwide confectionery retail value and will continue to do so in the next years. Here the growth is also beyond niches and there is space for new competitors to enter the market. As one can see on the forecasted growth rate, these regions are anticipated to perform much better than Western Europe or North America in the coming years (Figure 5; Euromonitor, 2009). Lower consumer awareness towards health concerns related to sugar consumption and an increasing number of consumers from the middle class are main drivers for the growth of these markets. However, these marketplaces are rather considered to be immature compared to Western European and North American markets (Figure 6), as many Western European premium confectionery manufacturers (e.g. Lindt&Spreungli or Guylian) just started efforts of internationalisation to these growing markets (Research and Markets, 2006). It is thus likely that the product offer of confectionery goods in these regions will grow in the coming years making it steadily mature. Figure 6: Stage of industry life cycle mature markets (Western Europe, North America) and immature markets (Middle East and Africa, Eastern Europe, India, China, Russia) 6 Lindt & Spruengli Company Overview Lindt&Spruengli is a leading Swiss-based chocolate confectionary company operating in the premium segment. Lindt was founded in 1845 and has currently 7.712 employees across Europe, USA, Australia and Asia (Datamonitor, 2009). The holding has its headquarter in the Swiss Kilchberg and is listed on the SIX Swiss Exchange (Lindt & Spruengli, 2008 p.38). Ernst Tanner is since 1993 Chairman and Chief Executive Officer (CEO). Despite the chocolate industry is affected by the economic downturn, Lindt has performed above average, reporting sales of CHF2,937 million in 2008 (CHF2,946 million in 2007; Figure 7; Lindt&Spruengli, 2010). Although the number has decreased, due to the adverse exchange rate, this equals to an organic growth of 2.3% (DGAP, 2010). The holding increased its market share from 0.15% (2005) to 0.17% in 2008 (Datamonitor, 2009). A net income of CHF261.5 million, which makes a surplus of 4.4% in comparison to 2007 (CHF250.5 million), could be achieved (Lindt&Spruengli, 2008). However, Lindt has steadily grown in the last years, trying to consolidate its top 50 position in global packaged food market (Figure 8). Figure 7: Sales in million CHF and change in % in the period 2005-2008 (Lindt & Spruengli 2006-2008) 7 Business System 7.1 Resource Base of Lindt & Spruengli Figure 8: Resource Base of Lindt&Spruengli (Lindt&Spruengli, 2009) With two plants in the USA, Lindt has set up an infrastructure of production and distribution in their second most important market after Western Europe. This makes outbound logistics within USA and to neighbouring markets (Canada, Australia) easier and cheaper, enables a faster reaction on big customers requirements and avoids partially unprofitable currency exchange costs between the Swiss Franc and other world currencies (Markt und Entwicklung, 2008). The more than 100 boutiques are an effective distribution channel that is integrated into the company and is thus independent from retailers or other distribution partners who particularly suffer from the current crisis. The boutique network and the Lindt Cafes (Australia) contribute to increase Lindts brand awareness by creating a whole Lindt world for the end consumers.

Lindts important intangible resource is the cooperative relationship with their suppliers which guaranties a smooth supply and minimises the supplier power owing to the opposite dependency built on long-term contracts. Lindt builds on a very long chocolate manufacturing heritage, dating back to 1984. Hence its knowledge and skills on chocolate manufacturing can be seen as one of their main intangible assets. This, combined with the strength of the brand, Lindt is in a fairly advantageous position since the demand for premium chocolate is increasing worldwide. 7.2 Activity System (Value Chain) of Lindt & Spruengli Figure 9: Value Chain of Lindt&Spruengli Main linkages identified in the Value Chain: Corporate social responsibility (CSR) is main added value to the entire value chain. Ghana Traceable Project is to track raw material and gain better understanding for the local farmers and suppliers needs. This project aims to ensure that every bag of cocoa beans can be traced from the chocolate factory back to the village of its origin. The operation also goes through a three stage process measuring quality in terms of size, fermentation and moisture from inbound logistics to operation stage. There are also quality checks during the collection stage, in-house laboratory tests to ensure that the materials are in good conditions (Datamonitor, 2009). The company is one of the few manufacturers to possess complete in-house expertise and control of every single production step, from the selection of the finest cocoa varieties through to the finished product. These activities suggest that Lindt is operating a differentiation strategy (Lindt & Spruengli group annual report, 2008). CSR is also added during the outbound logistics. Cooperation with engineers and the local government to cut energy by 16.2% per ton produced; use recyclable and biodegradable materials as packaging, test all packaging materials for their biodegradability. The package also contains correct detail, labeling the ingredients of the product, provide customers with different needs (Lindt&Spruengli Corporate social responsibility, 2009). Lindt sources some of the key materials from local farmers which can reduce the input costs and improve the time consuming from the materials being transfer to the production plants. Cocoa beans and cocoa butter pressed and roasted from third party can reduce the production time as well. Lindt set up production plants in the countries they are operating, therefore the production is closer to the retailers. The group can enjoy the benefits of reducing importing costs from other countries. Reduce transport route by using two floor trucks to carry the goods and deliver between units. This transport method can reduce the delivery frequency, save time and energy consuming (Lindt&Sprngli Corporate Social Responsibility, 2009). Lindt has outsourced some of their delivery channels to specialized firms; therefore the company can also reduce transport costs and have a better delivery service. 7.3 Product Offering Lindt & Sprngli offers products in the single business division which is premium chocolate. The group is operating through differentiation strategy and targets the premium quality segment to relatively high prices in comparison to competitors as e.g. Mars or Nestle. However, the goal is to provide high quality chocolate for the masses.

Only Barry Callebaut can be identified as a direct competitor within this strategic group. Certainly this segment is mostly covered by smaller private brands that can thus also be seen as competitors to Lindt. Most companies are operating through cost leadership but only a few by differentiation focus. The group has diversified their product portfolio and offers key products including chocolate tablets, box assortments, seasonal chocolate and bagged selflines/softlines, tablets, seasonal chocolate and boxed assortments being the strongest product groups (Figure 10). The brand is an important factor because the brand awareness is high. Ice cream and hot chocolate are further but relatively undeveloped product groups sold by Lindt. Figure 10: Segmentation by product categories (Euromonitor, 2009c). Lindt is the main brand and the umbrella brand to sub-brands Lindor and Excellence (Figure 11). Ghirardelli, Caffarel, Hofbauer and Kufferle are also brands and subsidiaries owned by Lindt, operating solely in their country of origin and not under the Lindt umbrella (Datamonitor, 2009). Lindt meets some of the key trends of customer needs acting in the premium segment and producing dark chocolate with exotic flavours and position themselves as eco-friendly and very fair trade-focused. Figure 11: Product Offering and Brand Structure of Lindt & Spruengli Lindts products have been selling across 100 countries (Figure 12) through retailers and outlets. Other distribution channels are the online shop and Lindt Boutiques that are operated by the company. A pilot project in Australia is the LINDT Chocolate Caf, which is very successful (Lindt & Sprngli, 2009 p.16). Figure 12: Balanced Split of Markets (Lindt & Spruengli, 2009b p.15) Main markets in terms of sales are Western European countries where the company makes 68% of its sales and North America with total sales share of 23% (Figure 9; Euromonitor, 2009c). The success in these markets can be attributed to the increasing demand for premium and dark chocolate as well as to the Lindts strong brand awareness. Lindt has further a strong presence in duty free shops on international airports. Figure 13: Sales in Western Europe in 2007 (Euromonitor, 2009c) Asian Pacific regions account for 3% of Lindts total revenue while Eastern Europe still is a negligible market for the company (Figure 11; 12; Euromonitor, 2009c). Figure 14: Sales in Asia Pacific in 2007 (Euromonitor, 2009c) Figure 15: Sales in Eastern Europe in 2007 (Euromonitor, 2009c) 7.4 Lindts positioning in comparison to Competitors 8 Organizational Structure Figure 16: Organisational Structure of Lindt&Spruengli Lindt & Sprngli is operating through functional organizational structure. The organization structure is decentralized and has a wide span of control (Equity Research Europe, 2006). The group is only relied on two governing bodies: Board of Directors (BoD) and the Group management. The BoD is responsible to define the company regulations and delegate to the senior managements (Articles of Association, Lindt & Sprngli AG, 2009). Decentralised structure and wide span of control ensures the employees and managers are more involved

with the decision making processes. In addition, the communication flow is more efficient because the country managers are given power to make decisions; decisions could be better taken to deal with local problems. 8.1 Organisational Process The company has a number of formal organizational processes to coordinate with employees and units within the organization. Annual general meeting are convened to the shareholders with the BoD. Team workings are also integrated to support different tasks throughout the organizations (Articles of Association, Lindt & Sprngli AG, 2009). The following table illustrates the organizations activities in different subsidiaries: D Distribution, P Production, M Management (Lindt & Sprngli Group Annual Report, 2008) Figure 17: Subsidiaries held directly by Chocoladefabriken Lindt & Sprungli AG 8.2 Organisational Culture Lindt hires talented people from diverse backgrounds and skills. All the employees and managers have the same values: respect, excellence, recognition, team work spirit and continuous improvement. The organisation creates an energising culture in which the employees have the freedom to question, to challenge and to develop their own ideas (Lindt & Sprngli Career: An energising working environment). Figure 18: Core features of Lindts Organisational Culture 9 SWOT Analysis Figure 19: SWOT Analysis of Lindt&Spruengli 10 Recommendations 10.1 Exposing the Corporate Social Responsibility Demand for fair trade products is growing especially in Western Europe as well as the awareness of the importance of sustainable production. Thus companies which have a strongly developed CRS tend to be rewarded by customers through increased sales. Sustainability and fairness is one of Lindts core strategies which is by far not enough exploited in the public. Lindt should emphasise its eco-friendliness, sustainable way of production and their involvement in charity projects in advertisements and public events. Its involvements in numerous projects such as the membership in the Round Table of Sustainable Palm Oil should be mentioned in media commercials to promote Lindts image as a green company. 10.2 Product Development to meet upcoming consumption trends Compared to Lindts competitors, the company has a smaller product portfolio due to the quality they concerned. It is not easy to extend product portfolio while keeping their premium chocolate brand image. There is a survey conducted by Barry Callebaut that proves that more than 1 in 3 European wants to buy chocolate that actively benefits health. Almost 4 Europeans in 10 (38%) are keen to have naturally reduced sugar levels, and are prepared to pay up to 10% more for it (Barry Callebaut AG, 2010). As Lindt has a very strong brand image in consumers awareness, it would be easier for them to convince the consumers that they produce healthy chocolates. Because Lindt uses 100% natural and fair trade cocoa beans as ingredients, which meet the market demand, It is a

great opportunity for Lindt to investigate products such as raw chocolate, low calorie, gluten free, soy free chocolates. Lindt is specialist in producing dark chocolate; they can produce dark chocolate with sugar free or different sugars contain levels. They can also use other substitutes of sugar. For example, honey, sucrose and brown sugar carries less calories and much healthier than white sugar. Although Lindt white and extra dark (70% cocoa and above) chocolate products by nature do not contain barley malt, because the production is run by mass production line. Therefore, there is a chance of cross contamination (triumphdining, 2010). That means Lindt need to extend their product line if they want to become gluten free. But the company can open a small production line to penetrate the market before they investigate heavy amount of money. However, the technology becomes the barrier to enter this particular segment. The fastest way to develop the market is strategic alliance. Kelloggs special K has been very successful in the cereal market. If the two companies can partner together, they can share knowledge and improve their brand images. Lindt can benefit in gaining knowledge of producing the healthy products. In addition, the two companies can produce chocolate cereal or chocolate cereal bars. This strategy can massively improve the brands image and market position. 10.3 Market penetration in Spain Lindt is focused on the Western European market and covers many of the countries with its products. As pointed out in 5, the growth rate in these markets will be declining in future. Growth potential within this market can still be achieved in Spain since the market is expected to outperform from rest of Western Europe thanks to increasing demand for premium and dark chocolate which Lindt covers both and is well positioned to exploit this situation more than it does so far. This can particularly be achieved by leveraging the brand awareness as well as pointing out the quality of Lindt products. Lindt is already operating in Spain but still having a relatively low sales rate whereas growth potential is forecasted to be high in coming years in Spain (see p. 24). Since Spain is an important holiday destination with hundreds thousands of tourist visiting each year Lindt should develop the duty free segment all over Spain. This leverages the market presence, boosts the margins and increases the brand awareness. Spain is also a good market to apply the Lindt Caf concept, that turned out to be very successful in Australia since ice cream is generally going better in southern countries. This can be seen as an opportunity to introduce and expand the ice cream business in Europe. 10.4 Penetration of Emerging Markets 10.4.1 Asia Pacific Lindts presence in Asia Pacific is still negligible accounting for only 3% of the companies total revenue. Since this region in general and China, Japan, Hong Kong, Thailand and Singapore in particular are key markets in terms of future market growth, Lindt should consider to focus on a more aggressive penetration strategy of these markets. Here Lindt needs to strengthen its brand awareness by increasing advertising quantity in mass media and through promotions as e.g. in supermarkets or at public occasions. Product adaptation to local circumstances, as e.g. the offering of smaller package sizes to lower prices, since Asian customers still dont spend too much on confectionery products are

to consider. Adaptation of flavours and packaging may be important too, because Asian taste differs from European or American (Euromonitor, 2009). Boxed assortments are best seller chocolate products in China since they serve as gift items. This trend will continue to grow during next years. Thus Lindt has to emphasise on distributing and promoting its Lindor brand in China which. The only strong competitor in the boxed assortments segment is Ferrero Rocher. Since the wealth of these regions is increasing there will be growing demand for premium chocolate which makes it very important for Lindt to penetrate into these markets before its competitors. The distribution channel in Hong Kong is the essential opportunity to support the expanding market, advertising is the key strategy to increase the market share in China and depending on the awareness of the brand, and will the customers indulge in buying chocolates. Figure 20: Opportunity Regions for market penetration (Euromonitor, 2009c) 10.4.2 Eastern Europe Another important internationalisation region, where Lindt can achieve significant growth, are Eastern Europe and Russia. Here Lindts presence is very small in comparison to other competitors. So far they have a total revenue of approx. 7% but the markets are said to have both high growth potential and demand for premium products. Investment should be mainly made in Russia since purchasing power here is higher than in Eastern European countries. Particularly in Russia Lindt should move beyond the big capital cities as Russias industrial regions like Rostov will start booming again after the country will overcome the crisis. Problems that Lindt will have to cope with entering these markets are severe custom barriers and the unfortunate currency exchange rates. 10.4.3 Latin America Last but not the least Brazil and other Latin American countries are the next penetration target for Lindt. There is an increasing trend that the customers in Latin America prefer to buy chocolate bars than assortments and baggy. Due to the increasing awareness of health issues, customers tend to seek for healthier options such as dark chocolate which contains higher percentage of cocoa and lower percentage of sugar. Latin America is still recovering from the recession, customers buy chocolate as a small treat. Instead of assortment, Lindt should focus on producing small portion of chocolates such as reduction from the original size of the chocolate bars or produced as a small baggy. Again, Lindt should focus on advertising and creating awareness amongst its customers. 10.5 Entering new Segments Lindt could consider entering new segments through the process of merger and acquisition to achieve growth and to consolidate its strong position since the cost leadership segment is already well covered by mainly big players (Figure 21), hence there is no real growth potential. As the premium chocolate is highly demanded there is neither any reason for Lindt to enter the low-cost segment nor would this appeal to Lindts strong brand image postulating high quality and uniqueness. Opportunity zones are therefore in the differentiation or focused differentiation areas where Lindt

Figure 21: Porters Generic Strategies applied to the confectionery industry (Euromonitor, 2009c) competes with Barry Callebaut and other smaller private brands such as Godiva. Basically Godiva, which operates in the luxury segment, is a potential acquisition company for Lindt. 10.6 Acquisition of Godiva Acquiring Godiva Lindt would enter the differentiation focus market and consolidate its market position against the big players. It could further spread its risks and make use of economies of scale. TBC 10.7 Pushing profitable Product Lines Especially in times of economic downturn companies face declining demand. For this reason Lindt should focus on its most profitable products in order to reduce costs and profit from economies of scale in production. Figure 22: Opportunity product groups (Euromonitor, 2009c) Figure 22 shows the chocolate with toys market is heavily dominated by Ferreros Kinder brand and is thus not seen as an opportunity expansion zone for Lindt. Since Lindt is already global market leader in seasonal chocolate there is no significant growth potential in this area but effort should be made to secure this position. Boxed assortments, tablets and bagged selflines are product groups that Lindt should try to expand and use as key products for industrialisation. These categories can be seen as future opportunities to build on since these products are the strongest ones. Chocolate with toys is none of Lindts strengths due to fires competition in this area by e.g. Ferrero (Euromonitor, 2009c). To satisfy customers need for variety seeking and to minimise costs it can be enough to implement minor changes on existing products like adding a new flavour, change the package or launch special product editions instead of inventing completely new products. TBC 11 Bibliography 11.1 Books Carpenter, Mason A.; Sanders, Gerard (2009) Strategic Management: Adynamic Perspective (2nd ed.). London: Pearson Prentice Hall. De Witt, Bob; Meyer, Ron (2004) Strategy. Process, Content, Context. An international perspective (3rd ed.). London: South-Western Cengage Learning. Hitt, M.A.; Ireland, R.D; Hoskisson, E.R (2008) Strategic management: competitiveness and globalization : concepts & cases. (8th ed.). Mason: Cenage Learning. 11.2 Documents from Databases Datamonitor (2009) Global Confectionery. Industry Profile. Reference code 0199-0710. Available from: http://www.marketlineinfo.com/library/DisplayContent.aspx? Ntt=global+confectionery&Ntx=mode %2bmatchall&Nty=1&D=global+confectionery&Ntk=All&Ns= [Accessed 15th February 2010]. Datamonitor (2009a) Chocolate Confectionery in the UK. Internal Market Environment. Available from:

http://academic.mintel.com/sinatra/oxygen_academic/search_results/show&/display/id=22770 0/display/id=334441#hit1 [Accessed 15th February 2010]. Euromonitor International (2009) Global Packaged Food: Driving Confectionery Retail Values in an Uncertain Economic Climate. Available from: http://www.portal.euromonitor.com/Portal/accessPDF.ashx?c=05\PDF\&f=F-12875216384905.pdf&code=33MfgP6Of98Cxyt6xlmGvPItEtk%3d [Accessed 15th February 2010]. Euromonitor International (2009a) Consumer Foodservice Guide to the Recession: Understanding the Crisis Consumer. Available from: [Accessed 15th February 2010]. Euromonitor International (2009b) Special Report: Global economic growth forecast lowest in 60 years. Available from: http://www.euromonitor.com/Articles.aspx? folder=Special_Report_Global_economic_growth_forecast_lowest_in_60_ years&print=true [Accessed 15th February 2010]. Euromonitor International (2009c) Chocoladenfabriken Lindt & Sprngli AG in Packages Food. Available from: http://www.portal.euromonitor.com/Portal/accessPDF.ashx? c=29\PDF\&f=F-142759-17285129.pdf&code=BArBtbbP6Lrr%2fc4UAgxsh6uNb60%3d [Accessed 15th February 2010]. DGAP (2010) Sales Report 2009: Lindt & Sprngli gains further market shares in a challenging environment. Available from: http://www.dgap.de/news/adhoc/sales-report-lindtspruengli-gains-further-market-shares-challenging-environment_359_613373.htm [Accessed 15th February 2010]. Financial Times Deutschland (2010) Zartbitterer Sieg fr Kraft. Available http://www.ftd.de/unternehmen/industrie/:cadbury-uebernahme-zartbitterer-sieg-fuerkraft/50062576.html [Accessed 15th February 2010]. from:

Ibisworld (2010) Chocolate Confectionery Production from Cacao Beans. U.S. Industry report. Available from: http://www.ibisworld.com/industry/default.aspx?indid=232 [Accessed 15th February 2010]. IndexMundi (2010) Cocoa beans monthly price [online]. Available from: http://www.indexmundi.com/commodities/?commodity=cocoa-beans [Accessed 15th February 2010]. Lindt & Sprngli (2009) Annual Report 2008. Available http://irpages2.equitystory.com/cgi-bin/show.ssp? id=2101&companyName=lindt&language=English [Accessed 15th February 2010]. from:

Lindt & Sprngli (2009b) Annual Results 2008. Financial Analysts Presentation, March 17th, 2009. Available from: http://irpages2.equitystory.com/lindt_relaunch/pdf/Full-Year-Results2008.pdf [Accessed 15th February 2010]. Lindt & Spruengli (2010) Press release. Sales Report 2009: Lindt & Sprngli gains further market shares in a challenging environment Available from: http://irpages2.equitystory.com/cgi-bin/show.ssp? id=1111&companyName=lindt&newsID=888412&language=English [Accessed 15th February 2010]. Markt & Entwicklung (2008) Der Goldhase huepft und huepft. Available from: http://www.textfarm.ch/referenzen/alimenta_06_08.pdf [Accessed 15th February 2010].

The Moodie Report (2008) Lindt sweetens T5 passenger experience. Available from: http://www.moodiereport.com/document.php?c_id=37&doc_id=17144 [Accessed 15th February 2010]. Research and Markets (2006) The Global Confectionery Market - Trends and Innovations. Available from: http://www.researchandmarkets.com/reports/39940 [Accessed 15th February 2010]. 11.3 Journals Campbell, Elizabeth (2010) Cocoa Drops to Five-Month Low on Supply Concern; Coffee Rises. Available from: http://www.businessweek.com/news/2010-02-23/cocoa-drops-to-fivemonth-low-on-supply-concern-coffee-rises.html [Accessed 15th February 2010]. Candy industry (1998) Lindt & Spruengli buy Ghirardelli Candy industry , 163 (2), 9 Confectionery News (2009) Trade body warns of sugar market disruption. Available from: http://www.confectionerynews.com/The-Big-Picture/Trade-body-warns-of-sugar-marketdisruption [Accessed 15th February 2010]. Porter, Michael (1985) Competitive advantage:Creating and sustaining Superior performance. New york: Free Press. 11.4 Websites ARTICLES OF ASSOCIATION, LINDT & SPRNGLI AG. (2009, Jan). ARTICLES OF ASSOCIATION. Retrieved Feb 2010, from LINDT & SPRNGLI AG official website: http://irpages2.equitystory.com/lindt_relaunch/pdf/Articles_of_Association_260109_English.pd f Barry Callebaut AG (2010, Jan) 1 in 3 British Consumers Want Chocolate With Health Benefits. Retrieved Feb 2010, from prnewswire: http://www.prnewswire.co.uk/cgi/news/release?id=189187 Canadian German Chamber of Industry and Commerce Inc. (2009, Dec). Lindt&Sprngli - a passion for chocolate. Retrieved Feb 5, 2010, from AHK: http://kanada.ahk.de/press/newsletter/newsletter-monthly/cgcic-newsletter200900/memberportrait-lindt/ Equity Research Europe (2006, Jan ) Food sector: Innovation feeds growth. Retrieved Feb 2010, from Credit Suisse: http://emagazine.credit-suisse.com/app/article/index.cfm? fuseaction=OpenArticle&aoid=126946&lang=EN Lindt & Sprngl Career: An energizing working environment. (n.d.). Career: An energizing working environment. Retrieved Feb 2010, from Lindt & Sprngli official website: http://www.lindt.com/uk/swf/eng/company/career/working-environment/ Lindt&Sprngli Corporate social responsibility. (2009). Sustainably consumed. Retrieved Feb 2010, from Lindt&Sprngli official website: http://www.lindt.com/au/swf/eng/company/corporate-social-responsibility/sustainablyconsumed/ Lindt&Sprngli Corporate Social Responsibility (2009) Sustainably sourced. Retrieved Feb 2010, from Lindt&Sprnglit official website: http://www.lindt.com/au/swf/eng/company/corporate-social-responsibility/sustainably-sourced/

Lindt&Sprngli Corporate Social Responsibility (2009) The environment in the production process. Retrieved Feb 2010, from Lindt&Sprngli official website: http://www.lindt.com/au/swf/eng/company/corporate-social-responsibility/sustainablyproduced/the-environment-in-the-production-process/ Lindt & Sprngli group annual report (2008) Lindt & Sprngli annual report 2008. Retrieved Feb 2010, from Lindt & Sprngli official website: http://www.google.com/url? sa=t&source=web&ct=res&cd=14&ved=0CBQQFjADOAo&url=http%3A%2F %2Fwww.researchandmarkets.com%2Freports %2F35104%2Fkey_players_in_the_global_confectionery.pdf&rct=j&q=world+chocolate+mark et+position&ei=YvBxS8H6GpOI0wSD-LHODA&usg=AFQjC Lindt&Sprngli press released (2006, Mar) Press Release: LINDT is new partner of the Cologne Chocolate Museum. Retrieved Feb 2010, from Lindt&Sprngli official website: http://irpages2.equitystory.com/cgi-bin/show.ssp? companyName=lindt&language=English&id=1111&newsID=26680&search_keywords=marketi ng Lindt&Sprngli press released (2009, Oct) A perfect match: Roger Federer to become global ambassador for his favorite chocolate LINDT. Retrieved Feb 2010, from Lindt&Sprngli official website: http://irpages2.equitystory.com/cgi-bin/show.ssp? companyName=lindt&language=English&id=1111&newsID=860538&search_keywords=mark eting Triumphdining (2010, Feb) Are Godiva & Lindt Chocolates Gluten-Free? Retrieved Feb 2010, from triumphdining: http://www.triumphdining.com/blog/gluten-free/2010/02/are-godiva-lindtchocolates-gluten-free/ Walsh, D. (2009, 12) Healthy chocolate? Retrieved Feb 2010, from Nutritionguru1's Blog: http://nutritionguru1.com/2009/12/06/healthy-chocolate-2/

You might also like