Business News

Cocoa power: Lindt results benefit from investment

Will be cautious entering China: Lindt & Sprüngli CEO

Swiss chocolatier and confectionary maker, Lindt & Spruengli, reported better than expected first-half earnings on Tuesday, despite challenges facing the market.

The company's net income came in at 90.6 million Swiss Francs ($92.7 million, EBIT) at the end of June, a 17.5 percent increase from the same period in 2014. The chocolate maker confirmed its full year outlook, expecting its sales will increase by 6-8 percent.

Despite facing a whole raft of challenges, including high raw material prices and a strong Swiss Franc, Ernst Tanner, chief executive of Lindt & Spruengli, told CNBC Tuesday, it was their continuous investment that helped keep the chocolatier afloat.

"We are selling the best quality products in the chocolate market on a worldwide basis. Secondly we have invested over more than (the decade) a treble million Swiss franc amount into technology and new equipment, and much more into the strengthening of the brand and global expansion. The continuous investment—which will continue in years to come—is paying back handsomely now."

Lindor Chocolates
PHOTOPRESS/Chocoladefabriken Lindt & Sprüngli AG

The company saw a love for chocolate predominately in Western developed markets, with double digit growth in North America and positive sales growth across Europe.

"In the U.K., we are growing by about 15 percent—gaining market share—which is the same for North America, where we are growing double digit, where the market is growing about two percent. But also in mature markets, like Germany, France and Switzerland, we are strengthening," on top of the brand's own retail stores helping profitability and brand recognition.

Asia and China may be big consumer markets and fans of luxury goods; however, the luxury market has come under pressure recently from a crackdown on gift giving and the devaluation of the yuan. Consequently, Tanner said he was keeping an eye on the likes of China, but the company was slightly restrained in its approach.

"China is an underdeveloped chocolate market. We are active in China, but we will do it very carefully as we don't want to expose ourselves too much as a group."

Hot chocolate! Behind the big cocoa rally

Many of Lindt's products are associated with the holiday season, for instance the Lindt bunny for Easter; however, Tanner said its two key franchises – Lindor and its high cocoa content in dark chocolate - keeps them in demand throughout the year.

"These products (Lindor and dark chocolate) are relatively demanding in manufacturing and since we have the technology which nobody else has. We are able to produce soft melting dark chocolate which is very unique in the marketplace," he said.

—By CNBC's Alexandra Gibbs, follow her on Twitter @AlexGibbsy.