SOUTH AFRICA – Swiss chocolatier Lindt & Sprüngli opened its first boutique in SA this week to boost profitability and brand profile.
With the local chocolate market valued at more than R5bn, middle-and upper-income consumers are increasingly developing a taste for premium chocolates and confectionery.
Although Lindt has retail partners such as Woolworths, Clicks and Pick n Pay, its retail stores are becoming important as a new business opportunity.
Lindt & Sprüngli SA CEO Nicolas Thoenen said the local chocolate market was consistently growing by more than 10% year on year.
“The premium chocolate segment, in which we have a driving force, has seen strong improvements over the last years and in which we see still lots of growth potential,” he said.
The Switzerland-listed company has made similar moves in other developing economies, including Brazil. The Lindt retail store, which opened in Sandton City, offers boxed chocolate, slabs and a Lindor pick and mix assortment.
Derek Engelbrecht, retail and consumer products sector leader at EY financial consultants, said chocolate was an impulse purchase.
“Impulsiveness is not linked to planning and saving, hence confectionery and sweets generally benefit from higher volumes, lower price, but appealing to the sweet tooth from a value perspective.
“Arguably, Lindt suffers from a perceived price premium perspective. This probably explains expanding their footprint through widespread availability via established retailers,” he said.
In August Lindt’s first-half earnings exceeded expectations, despite the high prices of raw materials and a strong Swiss Franc.
Net profit rose 15.6% in the six months to June to Sf65m ($66.4m). Sales were boosted by its acquisition of US rival Russell Stover.
Lindt’s shop concepts include cafés, outlets and factory stores.
At Kearney Africa principal Jaco Prinsloo said there was a fast-growing shopping culture emerging, providing greater retail opportunities in sub-Saharan Africa.
“There are distinct differences in stages of retail advancement. SA is in what we call the “mature” stage. In other words, SA — apart from its solid infrastructure — has an established formal shopping culture with growing private label exposure. Retailers in this market know they need to offer consumers quality and convenience.
“Consumers are also open to innovation so the success of the Magnum pop-up store and the advent of Starbucks are not surprising.
We anticipate that others will also follow this trend and as they aim to capitalise on growth in Africa when their traditional home markets are saturated and slowing down,” he said.