Industry and Strategic Project: Lindt and Spr

Topics: Company

Lind & Spurјingle GAG Lind & Spurјingle is engaged in producing and distributing premium chocolates around the world. The company has achieved a sales growth rate of more than 10% over the last 5 years and in 2008 recorded revenues of CHEF 261. 5 millions. Regardless of the current financial crisis and difficult market environment Land & Spurјangle managed to grow above average and outperformed Its competitors. The chocolate confectionery industry has been growing at a rate of 6% in the last four years and the top five producers account for 50% of the global market.

Since the housecoat industry is considered to be mature, the Company’s primary strategy to overcome the environment has been to focus on the exclusive positioning in the premium chocolate segment with concentration on Innovation and systematic expansion Into Nell potential geographies. Lind & Spurјingle has full control of all stages of production of the chocolate products – from quality selection of premium cocoa varieties from the best cocoa plants in the world to manufacturing through to elegant packaging.

The firm has been successful utilizing its tangible, intangible resource and its capabilities to have a competitive advantage and differentiate itself. The premium strategy of Lind & Spurјingle has been paying off in the last year. The trends in the chocolate environment indicate that the company should enter with a more aggressive approach into the Emerging Markets to capitalize on the window of opportunity that these countries currently offer.

Moreover the company should follow a diversification strategy and broad its sources of revenues by forward integration of the distribution channels.

Get quality help now

Proficient in: Company

4.7 (348)

“ Amazing as always, gave her a week to finish a big assignment and came through way ahead of time. ”

+84 relevant experts are online
Hire writer

One recommended strategy is to open Cafe© shops in high growing markets; this concept will enhanced brand awareness, as well as offer nonusers new innovative chocolate based products. Company Overview Lind & Spurјingle, from now on refer as Lind or Lind & Sprucing, is a Swiss home based and globally active company, producing and selling chocolate products in the premium quality segment. Lind & Sprucing Group has it headquarter in Switzerland. The company has subsidiaries (manufacturing sites) in France, Germany, Austria, Italy and the US, along with sales or distribution companies located in Canada, Poland, United Kingdom, Spain, Australia, Sweden, Mexico, Hong Kong and Dub.

The company has plants across Europe and the United States. The firm’s products include chocolate bars, chocolate tablets, chocolate boxes, pralines and truffles, its brands include Lind, Guerrilla, Seafarer, Hobart and Suffered. The company markets its products through its own specialty stores and boutiques, as well as through retail outlets and catalog sales. According to Border & Ice the company holds 4% of the chocolate market (Border & Ice, 2009). In 2008 with 7,712 employees, the firm total sales amounted US $2.

5 billion. The shares of Lind & Sprucing are listed on the Swiss and German Stock Market. The company was created in 1845 in the centre of Zurich by Mr.. Sprucing and his son, both confectioners. In 1899 the Spurјingle family took over the Swiss chocolate manufacturer Lind and the company received the name Lind & Spurјingle GAG.

Today Lind has acquired a global reputation as the most creative and innovative chocolate, specializing in premium quality chocolate. The Chocolate Confectionery Industry Lind & Sprucing sales growth of more than 10% and a ROCCO of more than 15% on average over the last five years, calls the attention towards the chocolate business. I nose Taluses malign De ten result AT an attractive Ministry; to Tina more tout seasons of these fugues an analysis of the chocolate confectionery industry is necessary. Years, the top five producers account for 50% of the global market (Catbird Annual Report and Accounts, 2008). Since chocolate is a regional business, where consumers of each region seek a particular taste, fragmentation in the market and complexities in production exists.

According to Denominator the global chocolate confectionery market reached a value of $43 billion in 2003, growing with a compound annual rate of 4. 1% in the period 1999-2003. During the consecutive next five years a compound annual growth rate of . 7% was expected, the market value was forecast to grow moderate and reach a value of $51. 5 billion by 2008.

Concerning the market volume, it reached 5. 16 billion keg in 2003, growing at a compound annual rate of 2. 1% during the period 1999-2003 (Denominator, 2004). Along with data provided by Reuters Stock Markets the food processing industry, where confectionery chocolate is listed, has 5 Yr. Bag.

Return on Investment of 5. 12%, 1% and 6% underneath the sector consumer goods and the S&P500 index respectively. [pick] Since the chocolate confectionery market is more consolidated in the Western sessions, the strong expansion into the Asian Pacific markets has been driving the growth in this industry. The Western markets are considered to be mature due to the stable consumer tastes and product innovation. However, the production of chocolate in Asia Pacific has been increasing, offering an opportunity for new markets.

The global chocolate Potential Industry Earnings (PIE) are estimated to reach $76 billion in 2011, growing at a compound annual rate of 3. 3% in the period 2008-2011. The market largest share of the global chocolate confectionery industry is expected to move from Europe, which account 46. 0% in 2003 to the Asian countries. In 2011 Asia and Ocean are forecast to be the world chocolate largest market with 34%, followed by Europe with 25% and North America and The Caribbean with 24%.

The presence of a firm in these 3 markets enables it to cover more than 80% of the chocolate PIE (World Outlook for Chocolate Candy, 2005). These data reveals that there is room for the chocolate industry to grow as it expands into the Asian Pacific markets. The chocolate confectionery industry globally has the characteristics of a mature Ministry; ten growth prospects are Tee, growth rates globally are estimates to Keep stable. The average return of this industry in the future is also expected to be steady. Moreover the price earnings ratio of the industry, an indicator of the investors’ expectations of the industry earnings growth in the future are more than 10% lower than the 500.

3. Key Industry Segments In order to analyze in more dept the chocolate industry is necessary to divide it into segments. This classification reflects the markets cover generally by the chocolate manufactures and it follows the industry standards. The main chocolates categories are presented as follow: Seasonal Chocolates Boxed Chocolates Milk Chocolates Exotic Flavors Sugar Free Liquid Chocolate Premium Chocolate Porter’s Five Forces Model This model, named after Michael Porter (1979), can be looked upon as a framework to analyze and structure an industry. It is a theoretical tool to elaborate the potential threats but also the chances of a particular industry.

Porter mentions five forces that have an impact on an industry; suppliers, buyers, potential entrant, substitutes and the rivalry among existing firms. By means of this analysis the industry attractiveness can be determined. This analysis will be applied to the premium chocolate segment, here Lind & Sprucing is a key player. Bargaining power of suppliers In production of premium chocolate the primary raw material is cocoa bean, secondary sugar, and milk. Concerning sugar and milk, there are numerous suppliers of these materials available around the world; there is no concentration, neither a necessary differentiation.

In the case of the superior cocoa beans utilize to a great extent Tort ten maturating AT ten premium conflate, It Is Important to consider that they come from the cacao tree, which is grown generally in small, family run farms in West Africa, Latin America and Southeast Asia. The cocoa planters sell their products on local markets to so called “apparatuses”, who collect the beans, weigh them, pay the planters and resell the beans to intermediates. The cocoa supply chain can involve up to 12 different steps as cocoa is moved from farming village to the chocolate manufacturing facility. Only in rare cases do companies purchase cocoa from the farmers. In this context, local farmers have no influence on the price that they receive for their beans (A Guide for Value Chain Analysis, 2004).

Moreover, since the cocoa beans are traded at the commodity future exchange in London, the farmers are price takers. Given these reasons in addition to the fact that according to CABOOSE, there are 4. Million of cocoa farms around the world, to whom the chocolate manufactures are an extremely important customer, the bargaining power of the chocolate confectionery industry suppliers is generally low (CABOOSE, 2009). However since the fine grade cocoa production represents a small part of the world’s supply, the bargaining power of superior cocoa beans supplier’s increases. In addition some cocoa farmers form associations to concentrate in groups and be able to negotiate better prices for their means; in this case the bargaining power of the supplier’s also increases.

Climate conditions and plant diseases play an important role in the cocoa production. If a plague damages the cocoa plantations in a region the number of suppliers is reduce and their bargaining power increases to some extent. Bargaining power of buyers One of the conditions that affect the power of buyers is product differentiation. Chocolate is considered a standard product, and the buyer has the facility to look for substitutes. Since the competition amongst chocolate manufactures is severe, housecoat variety and options is extremely high and continuous innovation is required by the producers to survive.

Additionally, the price sensibility of the chocolate is high; a small increase in the price would cost the manufacture a big market share if the quality of the chocolate is not improved at the same time. In this position, it is clear that buyers face low switching costs while changing vendors and their bargaining power is high. In the premium sector, consumers are willing to accept higher prices if the reason of the increase in the chocolate is Justified, for example raise in commodities prices. The power of premium chocolate buyers is lower. For the chocolate market the concepts business to customer and also business to business apply.

The buyers of the chocolate manufactures are direct consumers and also retailers, who sell the chocolate in their stores. Retailers can gain power if they pose a threat of production; if a buyer can successfully become his or her own supplier, the bargaining power of the buyer is high. However both retail buyers and Insularly-use Dryers In ten premium sector are Limited when posing a eaten AT backward integration because the ability to produce high quality chocolate products squires significant capital investment and brand awareness. In this sense, this lack of threat reduces the buyer’s bargaining power. Threat from Substitutes The threat of substitute products is a competitive force that can set a ceiling on the price the industry can charge for their product.

If there are substitutes available to the consumer, an industry potential profit is at risk. In this case, the customers switching costs are low. But if a company differentiates in a particular chocolate segment, it can create uniqueness and loyalty and the particular threat of substitutes is then lowered. This is the case of the premium chocolate segment. The chocolate industry must compete with numerous substitute products ranging from candies and cookies.

Many non-chocolate snacks, such as peanut butter, fruits, yogurt and ice cream are also available. There is no need to stick with a specific snack other than personal preference. In addition, chocolates also compete with substitute products in the retail arena. Specialty chocolates are used as gifts during numerous seasons and celebrations including Christmas, Easter, Halloween, Valentine’s Day, anniversaries and birthdays. Other types of gifts during these seasons are viewed as housecoat substitute products; flowers, fruit, Jewelry and teddy’s bear for example.

A variety of flavors, a hugely diverse selection of alternate snacks, and a wide variety of seasonal gifts make the threat of substitute products high in the chocolate confectionery industry, especially in the premium segment. Intensity of Rivalry The intensity of rivalry among competitors in an industry can create price wars, advertising battles, new product lines, and higher quality of customer service. This is not the exception in the chocolate industry, then numerous chocolate producers well epitomized and similar in size and in product range, create continuously new products lines and actively participate in advertising wars. In addition, high market growth rates in the past years in the premium sector attracted more firms into this market, increasing the intensity of rivalry in this segment. Another condition that increases rivalry intensity among competitors is fixed or storage costs.

If fixed costs are high, firms in an industry are under pressure to increase capacity. This extra chocolate production can only be sold if companies increase their share in the market. The chocolate confectionery industry has both high fixed costs and high storage costs. The industry fixed costs consist of large amounts of equipment and huge facilities to in-house manufacturing operations. Although this business involves perishable foods and ingredients, which typically have a short shelf-life, the storage costs are high due to the precise storage environment anemia.

For example, Don milk Ana conflate must temperature and humidity. Threats of New Entrants De Kept at a proper The threats of new entrants in the chocolate industry are low. The market is difficult or new players to enter, as it is dominated by major international players with a long and established history and success. These players include Nestle, Mars, Ferrier and Kraft Foods, all experienced companies with strong sales and presence. However the threats of new entrants in the chocolate premium segment are high, since these big players of regular milk chocolate can easily acquire a gourmet chocolate manufacture to enter this segment, taking advantage of their experience, their production facilities and distribution channels.

On the other hand a barrier for new entrants in the remit segment could be the brand historically value of the already established and recognize premium chocolate producers, which is highly appreciated by consumers in this sector. Trends in the Environment An evaluation of the chocolate business environment is essential to find out current trends in the taste of the chocolate consumers as well as in the chocolate production. The Global Magazine of Chocolate and Confectionery point out that there is a trend towards a few dominating companies in the chocolate confectionery industry. The top three on the list are Mars Inc. , Nestle AS.

ND Catbird Pal. Lind & Sprung” is rank eighth on the list (Rogers 2009). Of all chocolate confectionery segments mentioned earlier, the premium segment appears to be the most attractive one. The market research firm Minute shows sales of premium chocolate increasing 129% from 2001 to 2006 in the US, reaching US$2. 05 billion – about 13 percent of the total chocolate market.

Intel’s forecast for the premium chocolate market shows growth of 53 percent in constant terms over the next five years (Rogers 2009). There is no doubt why more and more big confectionery manufactures are entering he premium segment in most of the cases by Mergers and Acquisitions. In 2008 Turkeys њliker Group picked up former Belgian based premium chocolate manufacturer Goodie Chocolate, boosting its own position from No. 15 to No. 2 in the top 100 list mentioned previously.

In 2008 also Lotto Confectionery acquired former Belgian praline Chocolate Gillian (Rogers 2009). It seems clear that the premium sector has the best prospect now and in the future. According to Nielsen Strategic Planner report completed for “The Gourmet Retailer”, on average, respondents who eat chocolate are prepared to pay about 45 cents per once (S/ 20 per pound) Tort “Nell quality” conflate, a price polls very close to ten established industry standard for premium chocolate (about $8 per pound). Some 42 percent of respondents who eat chocolate eat premium chocolate products (Moran, 2008). The reasons why the premium chocolate is growing in popularity are presented as follow: The overall trend for the chocolate industry is evolving towards a more health conscious awareness level.

Consumers want to enjoy the luxury of a nice piece of very tasty chocolate but they also want to protect themselves from the bad side effects of regular chocolate, such as the amount of fat and sugar. Chocolate with high cacao content (ranging from about 45% to about 72%) are highly demanded by consumers. Premium chocolates fulfill this need since they have high cacao content, in particular dark organic chocolate. People are becoming more concerned about the world environment. They buy products that strengthen fair and sustainable trade.

Therefore, it is important for a chocolate company to produce environmentally friendly, starting from supporting local suppliers, producing organic chocolate and wrapping it up in environmentally friendly paper. Premium chocolate consumers want to enjoy a high end product which is also environmentally friendly because the chocolate becomes even more special. Premium consumers take care of themselves and their surrounding environment. They have the capabilities to buy chocolate that is a bit more expensive as long as they can support the environment and the organic fair trade with supplier countries. Chocolate consumers want to know where their chocolate and ingredients come from, whether it is from Ghana or Ecuador or other Latin American countries.

Premium chocolates are becoming similar to wine in the sense that their consumers eke to identify the products origin with certain tastes and characteristic. There is now a trend to internationalist the market and highlight the country of origin becoming a quality sign for premium chocolate. One of the major market growth drivers in the premium segment is the trend towards a healthier lifestyle. Consumers want to remain fit but at the same time they also want to enjoy life and treat themselves and others with high quality products. Therefore they seek products which they can identify themselves.

Premium chocolate fulfill these needs, especially dark chocolate. “Almost three-quarters of respondents ho purchased premium chocolate have heard that dark chocolate is good for their hearts, and believe the message. A similar proportion has heard that dark chocolate contains antioxidants, and believe the message” (Moran 2008). Another market growth driver in the premium segment is the various distribution channels now available. Customers have the opportunity to buy their favorite conflate In rate II stores, controller Outlines Ana tong online order.

Most AT ten chocolate manufactures offer this service on their websites. One major risk of the premium chocolate industry is the increasing competition due o the current trend of big chocolate manufactures to enter into this segment. Through Mergers & Acquisitions and Joint ventures companies such as Mars and Nestle have make a way into this attractive segment. A solid financial background, economies of scale and experience in the industry are some of the advantages that these multinational firms possess. In addition their presence worldwide and their high investment in marketing make the premium chocolate environment more competitive.

Another risk is the volatility of the cocoa price. In the production of premium chocolates higher percentage of cocoa is used than in milk chocolates. Prices have risen 75% in the last year (Ghana Business News, 2009).

Cite this page

Industry and Strategic Project: Lindt and Spr. (2017, Nov 07). Retrieved from

Industry and Strategic Project: Lindt and Spr
Let’s chat?  We're online 24/7