Strategy Recommendation for Lindt & Sprüngli

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Strategy Recommendation for Lindt & Sprüngli
John Yannone
Professors Jared D. Harris Ph.D. and Michael J. Lenox Ph.D.
via
Business Strategy in Practice Capstone Project
December 10, 2017

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recommendation is based on analyses performed by the author as assignments while taking the 5
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Executive Summary
PROBLEM: By pursuing an undisciplined approach to growth through acquisitions, Chocoladefabriken
Lindt & Sprüngli AG (Lindt & Sprüngli) has destroyed value and is on a path that will further weaken its
valuable competitive position in the premium chocolate manufacturing industry.
By acquiring non-Swiss and less premium brands, Lindt & Sprüngli has diverted attention away from
defending their more important global Lindt brand (75% of sales), which is worth defending because it is
the largest and most popular premium Swiss-made chocolate brand in the world.
Furthermore, acquisitions that are not able to be integrated with the Lindt brand because they do not fit
with the brand’s values and capabilities do not provide any efficiency gains to the organization and
prevent the firm from pursing a stronger differentiation strategy.
RECOMMENDED SOLUTION AND ITS VALUE: It is clear that Lindt & Sprüngli should build upon its global
Lindt brand, so the major strategic issue facing Lindt & Sprüngli is building the Lindt brand without being
diluted or distracted by non-premium brands. Lindt & Sprüngli should focus more on its profitable
growth in the focused differentiated worldwide premium chocolate industry and less on its position and
revenue growth in the overall chocolate industry.
The strongest and best strategic path for Lindt & Sprüngli to pursue is a strong focused differentiation
strategy of premium bean-to-bar chocolates manufactured primarily in Switzerland. The details of the
recommendation include:
 Only use chocolate produced by Lindt & Sprüngli that can be classified Swiss-made
 Disposal of Russell Stover, Whitman’s, Pangburn’s and Ghirardelli brands (22% of sales)
 Conversion of Caffarel, Hofbauer and Kufferle brands (3% of sales) to Lindt brands
 Reprioritize and expand performance based metrics to include ROIC and WACC
 Stop benchmarking against broader chocolate industry
The potential of the recommended solution to create value was validated by use of the Strategist’s
Toolkit’s Hypothesis Testing tool.
ABRIDGED RESULTS OF ANALYSIS: Research and analysis using the tools in the Strategist’s Toolkit
provided the following insights:
 Lindt & Sprüngli’s valuable competitive position is vertically integrated manufacturing of
premium Swiss chocolate taste with smooth melting texture contained within attractive
packaging
 Lindt & Sprüngli’s core purpose is to export a premium Swiss chocolate experience to the world
 Lindt & Sprüngli has capabilities to benefit from growing premium chocolate market
 Lindt & Sprüngli’s real competition is Godiva, See’s Candies and smaller premium firms
 Lindt & Sprüngli’s brands are further strengthened by their ability to interface directly with
consumers at their retail stores
 Lindt & Sprüngli’s acquisition of Russell Stover has weighed down sales growth and it is very
likely they overpaid for it
 Lindt & Sprüngli should build upon its global Lindt brand, since successful products under Lindt
brand generate revenues for decades with multi-million units sold annually

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A. Introduction
Chocoladefabriken Lindt & Sprüngli AG (Lindt & Sprüngli) is a profitable and growing (see EXHIBIT 1 & 2)
Swiss company with international operations (see EXHIBIT 3 & 4) that has a rich history of chocolate
making dating back to 1845.1
They have plans to be the largest premium player in the global mass
produced chocolate confectionary manufacturing industry by adopting a strategy of differentiation
(premium Swiss chocolates for their global brand Lindt representing >75% of sales; see EXHIBIT 5) that is
further enhanced by a large network of direct to consumer retail locations (~370 Lindt & Sprüngli
owned shops worldwide; see EXHIBIT 6).2,3
Lindt & Sprüngli commenced its global expansion a few
decades ago and established their Global Retail Division in 2009.4
Most of the modern global expansion
entry into foreign markets has been through greenfield development so they could maintain control of
product quality and marketing, but they have also acquired several regional and local brands (e.g.
Ghirardelli and Russell Stover) through acquisitions.5
It is clear Lindt & Sprüngli’s most successful strategy to date has been differentiation (premium
chocolate at a higher cost; see EXHIBIT 7). An analysis of their business model using the Business Model
Canvas (see EXHIBIT 8), shows that their value proposition is premium Swiss chocolate taste with
smooth melting texture contained within attractive packaging.
B. Competitive Analysis
Lindt & Sprüngli’s current valuable competitive position (vertically integrated manufacturing of premium
Swiss chocolate taste with smooth melting texture contained within attractive packaging) is revealed by
performing several analyses using various tools from the Strategist’s Toolkit.6
Competitor Analysis
The global confectionary manufacturing industry (see EXHIBIT 9) is comprised of hundreds of firms (too
many to list) and had over $132 billion in sales in 2016 based on revenues for the top 100 firms followed
by candyindustry.com.7
A large percentage of this industry manufactures or produces chocolate
containing products including chocolate bars, truffles, pralines & filled chocolates, molded chocolate
figures & shapes. Some of the firms purchase chocolate as a raw material while others purchase cocoa
beans as a raw material. Several firms (Mars, Mondelez, Ferrero, Meiji, Nestle and Hershey which had
2016 revenues ranging from $18 billion down to $7.5 billion) produce chocolate on a mass scale and sell
their products through multiple channels including online, downstream distributors and/or retailers
around the world.8
A few of the firms (Pladis and Lindt & Sprüngli which had 2016 revenues of $5.2
billion and $4.0 billion) also operate on a mass scale, but have chosen to offer premium chocolates and
operate multiple brick and mortar specialty retail stores throughout the world.9,10,11
The following table shows a logical breakdown of the chocolate portion of the confectionary
manufacturing industry:

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Strategic
Group
Example Firms Tendencies Traits
Mass Produced
Chocolate
Mars Inc., Nestle SA and
Hershey
Fewer larger firms who primarily sell
products to retailers
Consistent quality at lower
prices.
Mass Produced
Premium
Chocolate
Lindt & Sprüngli, Godiva (a
division of Pladis) and See’s
Candies (a division of
Berkshire Hathaway)
Fewer larger firms who sell products
direct to consumers and to retailers
Consistent superior quality at
higher prices.
Small Batch
Chocolate
Patrick Roger, Theo
Chocolate and
Vosges Haut-Chocolat
Many smaller firms who either sell
products to retailors or direct to
consumer
Varying quality with some firms
producing exceptional quality.
Also includes niche firms.
Lindt & Sprüngli is the world’s eighth largest (3rd
largest in US) chocolate manufacturing firm and one of
the largest specialty retailers of premium chocolates. .12
Their largest competitor in the specialty retail
space is Pladis’ Godiva division (601 boutiques and shops worldwide) .13
Most of the mass scale
manufacturers do not seem to have as much of a focus on direct to consumer retail stores as these two
firms. The next largest direct to consumer chains seem to be See’s Candies (a division of Berkshire
Hathaway with revenues estimated to be $700 million by D&B Hoovers and over 200 shops according to
their website) and Rocky Mountain Chocolate Factory (revenues of $40.5 million in 2016), which uses
the franchise model in order to have a large number of stores.14,15
It should also be noted that Lindt & Sprüngli’s sales growth has suffered (not meeting growth targets)
when taking Russell Stover (acquired in 2014) into account.16
Environmental Analysis
According to Mergent, “Europe has the world’s largest confectionery market”, worth more than US$50
billion annually and expected to grow to over US$100 billion by 2019, “mainly led by sales of chocolates,
the most popular item” .17
“The popularity of premium chocolate increased amid a global surge in premium products
consumption. Gaining from claims of chocolate’s health benefits, sales by most leading
European producers rose, with Switzerland’s leading confectionery company Lindt & Sprüngli’s
(SWX: LISN) sales increasing by 7.9% from 2014 to CHF3.65 billion (US$3.7 billion) in 2015.”18
Numerous factors are affecting the industry for premium chocolates in positive ways (see EXHIBIT 10).
The industry should benefit in the long run (looking out to 2050) from growing middle class populations
in Asia-Pacific, Latin America and emerging economies.19
While consumers are getting more health
conscious worldwide, confectionary sales remain strong in US and Europe because consumers like to
indulge (a trait that could gain wide acceptance if the rest of the world tries to copy Western culture). 20
Also health benefits associated with chocolate seem to resonate with consumers as they are made more
aware of them. At present, inputs to chocolate production (cocoa, sugar, and milk) are at or near multi-
year lows and oil prices are low giving consumers additional ability to consume (based on observing 10
year price charts, see EXHIBIT 11 & EXHIBIT 12). On the less positive side obesity concerns may lead to
political pressure for governments to tax sugar bearing foods in the future. 21
Five Forces Analysis
A five forces analysis (see EXHIBIT 13) was performed using the model developed by Harvard Professor
Michael Porter. The model is used to assess industry profitability as a result of current levels of

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competition, bargaining power of buyers, bargaining power of suppliers, threat of entry and the threat
of substitutes. Although there is some rivalry among firms, the market for mass produced premium
chocolates looks rather attractive with four of the forces being low.
 The bargaining power of buyers is low because there is a large number of buyers who are willing
to pay more for a premium product.
 The bargaining power of suppliers is low because there are many suppliers and in the case of
cocoa beans and other key ingredients the premium chocolate industry already pays above
market prices to ensure quality and sustainability.
 The threat of entry is low because of high sunk cost (specialized equipment, know-how and
processes are required to manufacture and market premium chocolates). There are also
economies of scales.
 The threat of substitutes is low due to perception about high quality of the product (as
IBISWorld puts it: “Many consumers consider chocolates daily luxuries, in which they will
indulge regardless of economic conditions”).22
Since Godiva and Lindt & Sprüngli are the clear giants in the premium chocolate segment, we see there
will be rivalry going forward by looking at their announced intentions.
According to a March 2016 article in the Financial Times, “Lindt & Sprüngli has set itself the goal of
building the largest global network of premium chocolate shops by sales within five years after reporting
a surge in demand for its top-of-the-range confectionery in 2015… it wanted to overtake the privately
owned Godiva chain of shops to take the top spot in luxury chocolate retailing by 2020".23
CEO [at the
time of the article] Earnst Tanner was quoted “We want to have a network that covers more or less the
whole world”.24
In order to achieve this goal they will need to overtake Godiva.
In a Candy Industry magazine interview with Godiva parent Pladis’ CEO Cem Karakas, he reiterated his
goal for Pladis to be number 1 or number 2 in each category they compete:
“As well as being the No. 1 or No. 2 in each category, we will become the fastest-growing leader
in our sector through consumer-driven innovation and tapping into these new ‘consumption
moments’ I’ve previously mentioned. Since becoming a global organization, we have seen the
successful launch of many synergistic products. As a global company, working together as a truly
global workforce, we understand the local needs well and operate through different
geographies. Our agility comes from our speed of transforming local consumer insights into the
product on the shelf.” 25
Competitive Life Cycle Analysis
The Second Corollary to the Fundamental Principle of Business Strategy is “change is the only constant”
in that over time, economic rents tend to dissipate as markets evolve. This corollary was added to the
Fundamental Principle of Business Strategy in response to what are called entrepreneurial or
“Schumpeterian Rents” named in honor of Austrian economist, Joseph Schumpeter who created the
phrase “the gales of destruction”. 26
According to Professor Lenox, “ what he [Schumpeter] meant by
that is that what contributes to economic growth, what makes markets so powerful, is that ultimately

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they create the conditions under which new innovations, new technologies and business models come
around and supplant the old, competitive order.27
All chocolate manufacturers use varying qualities of the same basic raw materials. For instance,
according to Merriam-Webster chocolate is “a food prepared from ground roasted cacao beans”.28
The
history of chocolate industry shows innovations are few and far between (slow moving, see EXHIBIT 14)
and this is largely due to using the same basic ingredients.
Timeframe Historic Event(s)
1500’s Hernan Cortez returns to Spain with cocoa beans and equipment necessary to make hot
chocolate beverages. Spain tried to keep it a secret and in ensuing years the Spanish
improved the flavor by adding sugar as a sweetener to offset its bitterness.
Mid
1770’s
A Frenchman named Doret invented a hydraulic machine to grind cocoa beans into
paste and another Frenchman named Dubuisson created a steam driven chocolate mill.
1828 Dutch chemist found a way to make powdered chocolate by removing about half the
natural fat (cacao butter) from chocolate liquor, pulverizing what remained and treating
the mixture with alkaline salts to cut the bitter taste.
1830 Chocolate mixed with nuts.
1847 Joseph Fry discovered that he could make a moldable chocolate paste by adding melted
cacao butter back into Dutch cocoa. First chocolate bar.
1875 Milk chocolate is invented in Switzerland.
1879 The conching machine invented by David Lindt creates rich, smooth cocoa paste.
1900 The process of dipping chocolate candies is automated by the “enrobing” machine.
1912 Pralines or filled chocolates invented in Belgium.
more
recently
Increasing interest in sustainable, effective cacao farming and harvesting methods.
Sources: Godiva29
and Smithsonian30
Lindt & Sprüngli provides some information about their Lindt brands on the company website. 31
Year
Introduced
Product Quantity Sold Each Year
1952 Gold Bunny More than 135 million
1967 Lindor balls More than 3.7 billion
1980’s Excellence bar more than 300 million
2011 Lindt Teddy Bear More than 60 million
2012 Hello not available
Stakeholder Analysis
A stakeholder analysis can be used to assess what the organization values and what others expect of it.
According to Professor Harris, the “key objective in strategy is to find and occupy that valuable,
competitive position that allows us to create value for a number of different parties”. 32
As a business
with international operations there are many Lindt & Sprüngli stakeholders. After looking at the value

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chain (see EXHIBIT 15) we can identify primary and secondary stakeholders and there is plenty of
evidence that Lindt & Sprüngli engages with various stakeholders in the course of conducting business.
Primary Stakeholders Secondary Stakeholders
 Board of Directors & Shareholders
 Consumers
 Distributors & Retailers
 Employees
 Suppliers
 Communities
 Special Interest Groups
 Governments & Regulatory Bodies
 Competitors
 Media
 Consumer Advocate Groups
It can been seen that Lindt & Sprüngli makes an attempt to align the needs of stakeholders by reading
their credo, promise and comments from their CEO in their 2016 sustainability report: 33
Credo WE ARE AN INTERNATIONAL GROUP AND ARE RECOGNIZED AS A LEADER IN THE
MARKET FOR PREMIUM QUALITY CHOCOLATE
We strive for excellence to maximize worldwide market opportunities. We
thoroughly understand our consumers, their habits, needs, behavior and attitudes.
This understanding serves as the base to create products and services of superior
quality and value. We will never make concessions that compromise our quality of
product, packaging and execution.
OUR WORKING ENVIRONMENT ATTRACTS AND RETAINS THE BEST PEOPLE
We encourage, recognize and reward individual innovation, personal initiative and
leadership of people throughout the organization. Respect of personal individuality,
trust and fair play characterize our working relationships. Teamwork across all
disciplines, business segments and geographies is a corporate requirement to
create a seamless company of people who support all others for mutual success.
We will develop professionals and facilitate communication and understanding
across all disciplines.
OUR PARTNERSHIP WITH OUR CONSUMERS, CUSTOMERS AND SUPPLIERS
IS MUTUALLY REWARDING AND PROSPEROUS
An in-depth understanding of our consumers' needs and our customers' and
suppliers' objectives and strategies enables us to build a mutually rewarding and
long lasting partnership.
WE WANT TO BE RECOGNIZED AS A COMPANY THAT CARES FOR
THE ENVIRONMENT AND THE COMMUNITIES WE LIVE AND WORK IN
Environmental concerns play an ever increasing role in our decision making process.
We respect and feel responsible for the needs of the communities in which we live
in.

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THE SUCCESSFUL PURSUIT OF OUR COMMITMENTS GUARANTEES
OUR SHAREHOLDERS AN ATTRACTIVE LONG TERM INVESTMENT AND
THE INDEPENDENCE OF OUR COMPANY
We wish to remain in control of our destiny. Independence through superior
performance will allow us to maintain this control.
Promise “All products leaving our factories live up to our commitment to sustainable
behavior along the value chain.”
CEO Comments
Sustainability
Report
 “In the long run, the impact of sustainability initiatives on business results
yields in most cases a good return. Examples are our efforts to reduce
energy consumption, carbon dioxide emissions, water consumption, and
waste. In some areas, calculating an expected return is not that simple.
Sustainable cocoa, for instance, comes at high costs which cannot be
passed on to the consumers. Nevertheless, our investments in this field
strengthen our brand, and consumers recognize our efforts to offer
chocolate produced with ethically sourced raw materials.”
 “We focus on sustainability issues that are important for our business and
our stakeholders – the so-called “material issues” as defined in our
sustainability strategy. Within those “material issues”, raw material
sustainability – specifically cocoa – is the most important. I have personally
been the driver behind sustainable cocoa sourcing for more than ten years
at Lindt & Sprüngli. It is therefore consequential that also as CEO, my focus
and dedication continues to be on this area. Further, we will increase the
level and quality of communication to consumers about our achievements
in sustainability in general, and in cocoa sourcing specifically.”
EXHIBIT 16 demonstrates how transparent their sustainability strategy is with respect to engagement of
stakeholders.
Capabilities Analysis
A capabilities analysis provides vital insight to where Lindt & Sprüngli might have a potential
competitive advantage. As we learned in class, the Fundamental Principle of Business Strategy is “if
everyone can do it, it’s difficult to create and capture value from it” and “It is at the intersection of
values, opportunities, and capabilities that valuable competitive positions that create and sustain value
for stakeholders emerge”.34
We also learned that according to the Resource Based Perspective firm
capabilities matter most as they can lead to advantageous cost structure and inability of others to
imitate them.35
By looking at the value chain for Lindt & Sprüngli (see EXHIBIT 15), their Credo (see above) and reading
Pages 49 – 70 of their 2016 Annual Report, one can assess the capabilities (see EXHIBIT 17) and
competitive advantages held by Lindt & Sprüngli.
One of Lindt & Sprüngli’s capabilities is exporting the premium “Swiss chocolate” experience to their
customers. This is difficult for their main competitor’s to do because Godiva represents “Belgian
chocolate” and See’s Candies represents “American chocolate”. Lindt & Sprüngli’s brands are further
strengthened by their ability to interface directly with consumers at their retail stores. The feedback
loop this creates is discussed in the 2016 Annual Report on page 8.

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During the past financial year, our own chocolate shops and cafés once again proved to be a
great success factor, and contributing double-digit sales growth in Global Retail. Not only are
these extremely well perceived by consumers, but they also have a big impact on our brand
familiarity and image values. They enable us to consistently communicate our key brand values
such as premium quality, Swiss tradition, product diversity, our commitment to sustainability,
and to allow them to be actively experienced. We managed to generate over 50 million
consumer contacts over the course of the last financial year. 36
Their other capabilities of creating a unique taste and melt in mouth texture result from Lindt & Sprüngli
being one of the few mass produced “bean-to-bar” chocolate makers in the world, which gives them full
control of the production chain and the resulting quality of product. This is also discussed on page 8.
The success of the Lindt & Sprüngli Group is based on our uncompromising commitment to high
quality in all areas of our business activity. For us, quality always has top priority. Lindt &
Sprüngli is one of the few chocolate manufacturers to keep control over every step of the
production process, from the selection of the finest cocoa varieties through to the finished
product. This gives us an important competitive advantage and lays the foundation for the
unique chocolate experience that a steadily growing number of consumers expect from the Lindt
brand.37
Portfolio Planning Matrices (Diversification Matrix)
EXHIBIT 18 is a diversification matrix for Lindt & Sprüngli. As can be seen their Lindt brand (>75% of
sales) is in an attractive industry and has a competitive advantage. When a business lies in this quadrant
of the matrix, the firm should build upon its position and this is what we see Lindt & Sprüngli doing.37, 38
C. Strategic Issues
The following table6
identifies key findings and strategic issues uncovered while using various tools in
the Strategist’s Toolkit to reveal different things about Lindt & Sprüngli’s strategic position and help us
better understand Lindt & Sprüngli’s values, opportunities and capabilities.39
Competitive
Analysis Tool
Key findings and strategic issues
Competitor
Analysis
 Lindt & Sprüngli’s is one of the leading firms in the mass produced premium
chocolate manufacturing industry
 Lindt & Sprüngli (#2) competes with Godiva (#1), See’s Candies (#3) and a
multitude of smaller firms around the world in the brick and mortar retail
chocolate store channel
 Lindt & Sprüngli’s acquisition of Russell Stover has weighed down sales
growth
Environmental
Analysis
 Popularity of premium chocolate increasing (dark chocolate health benefits)
 Obesity concerns may cause governments to tax sugar bearing foods in the
future. Also preferences trending towards healthier, premium and/or
organic foods
 Growing populations in Asia-Pacific and emerging economies

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Five Forces
Analysis
 Although there is some rivalry among firms, the market for mass produced
premium chocolates looks rather attractive with four of the forces being
low
 Rivalry between Lindt & Sprüngli and Godiva. Lindt & Sprüngli wants to
overtake Godiva and have the largest global network of premium chocolate
shops
Competitive
Life Cycle
Analysis
 Competitive life cycle for Lindt & Sprüngli is very long
 Annual volume (units) of products sold in the mature phase ranges from
hundreds of millions to billions and one product in the growth phase sees
tens of millions.
 Most of the products sold in the global Lindt brand have been on the
market for decades
Stakeholder
Analysis
 Lindt & Sprüngli considers and engages with a multitude of stakeholders
 Cocoa sustainability is the most important sustainability material issue
facing Lindt & Sprüngli
Capabilities
Analysis
 Exporting premium “Swiss chocolate” experience
 Direct and frequent communication with end customers through brick and
mortar network of stores
 Mass production of premium “bean-to-bar” chocolate with unique taste
and melt in mouth texture
Diversification
Matrix
 Lindt & Sprüngli should build upon its global Lindt brand
EXHIBIT 19 reiterates Lindt & Sprüngli’s sales growth target of 6% to 8% annually. In a press release
dated March 7, 2017, Lindt & Sprüngli reported organic growth of 6% for 2016 [this figure excluded
results of Russell Stover] and stated “the adjustments to Russell Stover’s product portfolio and
promotions strategy also had a negative impact on sales during the financial year, while at the same
time laying the long-term foundation for profitable growth in the future”.40
EXHIBIT 20 demonstrates
sales growth is still being impacted by Russell Stover. Clearly Lindt & Sprüngli has more work to do on
this acquisition from 2014.
The rivalry between Lindt & Sprüngli and Godiva has already been discussed: see Competitor Analysis
and Five Forces Analysis in the table above. With several top management team changes at Lindt &
Sprüngli over the past year and a new CEO at Godiva, continued rivalry, change and uncertainty are
inevitable.41, 42
Lindt & Sprüngli promoted CEO from within, whereas Godiva hired Starbuck’s Global
Chief Marketing Officer for the role43
. It is also worth noting that See’s Candies is planning to open more
stores in the United States as expressed by An Ostrander, their Senior Vice President of Sales: “In this
time of uncertainty for many brick and mortar retailers, we’re very excited to be growing and expanding
our retail presence throughout California, as we also look to add retail locations in the other states”.44
D. Major Strategic Issue
As we learned “in practice the purpose of business strategy is to create, to maintain and to defend a
valuable competitive position. And this is something that emerges out of the intersection of
values, opportunities and capabilities”.45

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In reviewing the current competitive position, we can piece together Lindt & Sprüngli’s core purpose
and values. They consider and engage with a multitude of stakeholders in order to export a premium
Swiss chocolate experience and make the world a sweeter place.
We also know that the market for premium chocolate is growing for a number of reasons including
increasing populations and a rising popularity of premium chocolate.46, 47
As a leading firm in the industry they also have the capabilities for mass production of premium bean-to-
bar chocolate with unique taste and melt in mouth texture.
It is clear that Lindt & Sprüngli should build upon its global Lindt brand, so the major strategic issue
facing Lindt & Sprüngli is building the Lindt brand without being diluted or distracted by non-premium
brands. Lindt & Sprüngli should focus more on its profitable growth in the “focused differentiated”16
worldwide premium chocolate industry and less on its position and revenue growth in the overall
chocolate industry.
E. Strategic Paths
Three viable strategic paths Lindt & Sprüngli may pursue in order to make the world a sweeter place and
strengthen their “valuable competitive position at the intersection of their values, capabilities and
opportunities”48
were previously identified by the author.49
1) Differentiation Strategy: Brand rationalization
In recent years it seems as though Lindt & Sprüngli has pursued sales growth over defense of it valuable
competitive position. Lindt & Sprüngli’s brand portfolio (EXHIBIT 5) seems at odds with key findings and
strategic issues uncovered from use of Strategist’s Toolkit:
Key findings and strategic issues Observations
Lindt & Sprüngli’s is one of the leading firms in
the mass produced premium chocolate
manufacturing industry
Lindt & Sprüngli compares itself to the entire
chocolate industry (see EXHIBIT 21) in investor
presentations. There is also no mention of
Godiva (their most logical top competitor) in
EXHIBIT 21, Lindt & Sprüngli’s annual report or on
the http://www.lindt-spruengli.com website.51,52
Lindt & Sprüngli’s $1.6 billion acquisition of
Russell Stover has weighed down sales growth
Lindt & Sprüngli has only been able to report
meeting organic sales growth targets by
excluding Russell Stover and they very likely
overpaid for the acquisition (a phenomena
known as winners curse)53
since we know
Hershey submitted a $1 billion bid in what was
described as a “battle” for Russell Stover. 54
Exporting premium “Swiss chocolate” experience Only 75% of Lindt & Sprüngli’s brand portfolio is
Swiss (the Lindt brand)

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Mass production of premium “bean-to-bar”
chocolate with unique taste and melt in mouth
texture
Only the Lindt, Ghirardelli, Caffarel and Hofbauer
brands are “bean-to-bar”55,56,57,58
On one hand the Russell Stover acquisition made Lindt & Sprüngli the #3 chocolate manufacturer in the
US, but on the other hand it dilutes the strength of Lindt & Sprüngli’s current valuable competitive
position.59
Going forward Lindt & Sprüngli must decide on a new differentiation strategy and then perform a brand
rationalization analysis to decide if any assets should be sold or spun off.
2) Product Development: Develop new products with an emphasis on premium chocolate
Once Lindt & Sprüngli decides on a clear differentiation strategy, they can then focus more attention on
developing new products consistent with the new (or clearer) strategy derived from key findings and
strategic issues uncovered from use of Strategist’s Toolkit:
Popularity of premium chocolate increasing (dark
chocolate health benefits)
With growing concerns about obesity and health
around the world, a new Lindt product line
should be created that combines premium
chocolate with healthy premium ingredients
• High cocoa content
• Low sugar content and/or alternative
natural sweeteners like honey, maple
syrup, molasses, etc.
• Use of more and healthier
ingredients among nuts, grains,
beans, fruit, berries, leaves, herbs,
vegetables, etc.
Obesity concerns may cause governments to tax
sugar bearing foods in the future. Also
preferences trending towards healthier, premium
and/or organic foods
In addition to the above, Lindt & Sprüngli must
continue to source the highest quality raw
materials. Lindt & Sprüngli should continue not
using ingredients that have been genetically
modified (GMO) or derived from genetically
modified organisms (See EXHIBIT 22).
Competitive life cycle for Lindt & Sprüngli is very
long. Annual volume (units) of products sold in
the mature phase ranges from hundreds of
millions to billions and one product in the growth
phase sees tens of millions. Most of the products
sold in the global Lindt brand have been on the
market for decades
Successful products created by Lindt generate
revenues for decades with multi-million units
sold annually.
Cocoa sustainability is the most important
sustainability material issue facing Lindt &
Sprüngli
This must be kept in mind when developing new
products.

14
Lindt & Sprüngli should build upon its global Lindt
brand
New product development is one such path.
3) Market Development: Continue expanding internationally
Once Lindt & Sprüngli decides on a clear differentiation strategy, they can then continue expansion
internationally consistent with the new (or clearer) strategy derived from key findings and strategic
issues uncovered from use of Strategist’s Toolkit:
Lindt & Sprüngli’s is one of the leading firms in
the mass produced premium chocolate
manufacturing industry. Exporting premium
“Swiss chocolate” experience. Mass production
of premium “bean-to-bar” chocolate with unique
taste and melt in mouth texture
Lindt & Sprüngli has the ability and expertise
needed to continue scaling globally.
Growing populations in Asia-Pacific and emerging
economies
As EXHIBIT 23 shows, Lindt & Sprüngli has only a
small presence in regions of the world outside of
Europe and North America.
If we compare the number of stores by region with world chocolate market (see EXHIBIT 24) we can see
that Lindt & Sprüngli has an opportunity to grow in the Asia Pacific region. The risk is reduced since this
is also the region of the world with the highest forecasted growth (see EXHIBIT 25).
F. Recommendation
Choosing a Differentiation Strategy
At this point in time, Lindt & Sprüngli must choose a differentiation strategy that sets the tone for things
to come. Once the differentiation strategy has been selected, then a brand rationalization analysis can
be performed to identify which brands to keep, which brands to alter and which brands to dispose (sell,
spin-off or shut down). It is important that this is done before developing new products and continued
expansion globally (so that these initiatives can proceed with the new strategy in mind).

15
There seems to be a few differentiation strategies that could be pursued listed in order from more
focused/strongest (and lowest competitive risk) to weakest (highest competitive risk) with some
implications:
Differentiation Strategy Brand Rationalization Implications
Premium bean-to-bar Swiss chocolates (the
historical differentiation strategy used by Lindt &
Sprüngli)
Lindt & Sprüngli would need to sell or spin off
brands representing up to 25% of revenues.
Premium bean-to-bar European chocolates Lindt & Sprüngli would need to sell or spin off
brands representing ~ 22% of revenues.
Premium bean-to-bar chocolates Lindt & Sprüngli would need to sell or spin off the
brands acquired in 2014 during the Russell Stover
acquisition. Lindt & Sprüngli would need to
determine if Ghirardelli is a premium brand (see
below).
Bean-to-bar chocolates Lindt & Sprüngli would need to sell or spin off the
acquisition.
Premium chocolates Lindt & Sprüngli would need to determine if
acquisition are indeed premium chocolates (see
below). Lindt & Sprüngli would need to
determine if Ghirardelli is a premium brand (see
below).
EXHIBIT 26 is a table created in order In order to test whether or not the Russell Stover and Ghirardelli
brands should be considered premium chocolate. Lindt and Godiva are clearly the premium brands as
most of the items analyzed cost more than $2.00 per ounce. It is hard to argue Russell Stover or
Ghirardelli are premium brands with several of their items priced below $1.00 per ounce.
Specific Strategic Path Recommendation (Hypothesis)
Based on all analysis to date, the strongest and best strategic path for Lindt & Sprüngli to pursue is a
strong focused differentiation strategy of premium bean-to-bar chocolates manufactured primarily in
Switzerland (allowing then to be classified as Swiss-made). The details of the recommendation include:
1) Over 90% of chocolate products must be manufactured from cocoa beans that have been
processed into cocoa liquor by Lindt & Sprüngli controlled factories located in Switzerland.

16
NOTE: Since Switzerland is known for high quality milk, further differentiation could be
attained by requiring all milk chocolate product to be manufactured using high somatic
cell count milk from cows living in Switzerland or highest quality milk available where
factories are located (tagline: the best milk chocolate is made from the best milk and
chocolate).60
2) Higher priority disposal of the following brands, which represent ~22% of sales:
a. Russell Stover, Whitman’s and Pangburn’s (US recipe)
b. Ghirardelli (US recipe developed by Italian immigrant)
3) Lower priority conversion of the following brands, which represent ~3% of sales, to Lindt
labelled products:
a. Caffarel (NOTE: chocolate may be an Italian chocolate recipe)
b. Hofbauer and Kufferle (Note: chocolate may be an Austrian chocolate recipe)
NOTE: Some of the Caffarel and Hofbauer products are already sold in Lindt stores (and
website) as part of the “Master Chocolatier Specialties” collection.61
4) Change intense focus on financial growth and sales targets (EBIT growth and organic growth) to
broader focus including return on invested capital and cost of capital. The goal should be to
incentivize executives to offer a compelling value to consumers who desire premium products
and not pursue value destroying acquisitions. Compensation plans should be revised
accordingly.
5) Start benchmarking and differentiating against the right competition (Godiva, See’s and other
premium chocolate manufacturers/retailers) while also exploring new opportunities from
current non-customers (e.g. Blue Ocean Strategy). Lindt & Sprüngli should also benchmark
current performance against their prior performance with the goal of continuous improvement.
Hypothesis Testing
The above actions form a hypothesis that can be tested using the Hypothesis Testing tool. The tool is
used to identify key assumptions for what must be true for the hypothesis to achieve the desired result
of creating more value.62
Test Type ID Core Assumptions about Specific Strategic Path Recommendation
Value Test AVT1
AVT2
AVT3
Recommended actions create value by giving Lindt & Sprüngli a highly
differentiated focus (premium bean-to-bar Swiss chocolate).
Recommended actions create value by increasing the value of each division.
Recommended actions create value by improving the form of the business
and reducing cost.
Execution
Test
AET1 Lindt & Sprüngli either already has the investment banking connections
required or has access to people who are knowledgeable and can recommend
the best investment bank(s) to use for asset sales or spin-offs.

17
Scaling Test AST1 Lindt & Sprüngli already has the capability to scale the global Lindt brand.
Defensibility
Test
ADT1 Recommended actions creates a defensible position that will be hard for
competitors to imitate.
A thought experiment was performed by the author to help focus additional data collection and
research.
Assumption
Thought Experiment:
 What do we know?
 What don’t we know, but could?
 What don’t we know & can’t?
AVT1 We know from Porter that a focused differentiated strategy is one of the generic
strategies a firm can use to compete effectively. 63
What we don’t know, but could is
how well the Lindt brands compare to the other brands in the various regions. What
we don’t know and can’t know is if Switzerland will ever lose its prominence as one of
the best chocolate countries in the world. 64
AVT2 We don’t know if the parts (individual brands) are worth more than the sum (Lindt &
Sprüngli) because Lindt & Sprüngli does not provide enough information to accurately
calculate the intrinsic value of each division, but we do know that firms with more
complex financial reports are usually valued at a discount known as “conglomerate
discount”.65
AVT3 We don’t know how much value will be created by proposed change in business form,
but we can perform some analysis to demonstrate how value will be created.
AET1 We know Lindt & Sprüngli is sophisticated enough to engage an investment bank, so
we will not consider this any further.
AST1 We also know Lindt & Sprüngli is able to scale globally as evidenced by the success of
the global Lindt brand, so we will also not consider this any further.
ADT1 We know that the secret recipe, bean-to-bar vertical integration and conching process
adds cost that the larger non-premium chocolate manufacturers will be unwilling to
adopt. We don’t know if Lindt & Sprüngli has any competitors in Switzerland that could
adopt the same strategy, but we could perform more research on the Swiss chocolate
industry.
After collecting additional specific data and conducting more specific research, we can test the
hypothesis assumptions.
Assumption Assessment of hypothesis assumptions (are they true)
AVT1 This assumption is true.
A recent paper published in the Journal of Global Entrepreneurship Research reviewed
the marketing strategies from the European chocolate industry. 66
EXHIBIT 27 from the study shows that “Lindt & Sprüngli” was “voted the most familiar
and favorable chocolate brand among the consumers” top ten brands making it ranked
#1, whereas Ghirardelli was ranked #3 and Russell Stover did not make the list.

18
EXHIBIT 28 is the current ranking of the best chocolate companies at www.ranker.com,
which is a website that uses the wisdom of the crowd to vote on various topics. 67
According to the website, the chocolate companies are ranked by chocoholics:
Region Lindt Ghirardelli* Russell Stover
All Voters 1 7 Not on list
International 1 11 Not on list
Central US 3 2 Not on list
Northeastern US 3 1 Not on list
Southern US 4 2 Not on list
West Coast US 4 1 Not on list
Midwest US 2 1 Not on list
*includes cocoa based baking products and condiments
While Ghirardelli is ranked higher than Lindt in the various US regions, we don’t know
if it is due to the chocolate or baking products. It should also be noted that Ghirardelli
has retails stores predominantly on the West Coast of US, while Lindt is predominantly
on the East Coast.
A quick look at consumer ratings for boxed chocolates from Consumer Reports
indicated Russell Stover and Whitman’s only score on the low side of the good rating
(“merely so-so”).68
Unfortunately Lindt and Ghirardelli were not included.
Competitors See’s and Godiva were ranked very good. 69
A look at look at consumer ratings for bar chocolate (www.consumerreports.org)
indicated Lindt milk chocolate scored very good (similar to competitor Godiva),
whereas Ghirardelli milk chocolate scored only good.70
It also showed both Lindt and
Ghirardelli were very good for dark chocolate. The Ghirardelli product had a higher
score, but it also has a higher Cacao content. 71
Time Inc. publishes Food & Wine magazine intended for the more affluent. On
November 30, 2017, the editors of the magazine published “Best Chocolate in the
U.S.”.72
Lindt is listed at #13 out of 31 (Godiva and See’s were listed at #8 and #11)
Ghirardelli and Russell Stover did not make the list.
It is clear that the Lindt brand is very strong globally and that the Russell Stover brand
is not in the same class. Some of the data makes Ghirardelli look more popular in the
US among general population, but other research shows Lindt as a better chocolate
brand among more affluent consumers who are more likely to buy premium products
in larger quantities.

19
All money spent by Lindt & Sprüngli to acquire/improve the regional brands constitute
a sunk cost and should not be considered when weighing options. If Lindt & Sprüngli
were to spin-off these brands it is very likely the resultant value of the separate firms
will be more than current value of Lindt & Sprüngli less the investment banking fees
associated with the spin-offs (see AVT3 for added weight to this argument).
If the regional brands are sold through a competitive bidding process, then it is likely
they can be sold at a premium.
Money from these asset sales could be used to convert the retail stores, some of which
should not be included in the sales of the brands. Alternatively, the company could
pursue acquisitions in line with new strategy. Potential acquisition targets that
manufacture bean-to-bar chocolate in Switzerland include:73
a. Favarger
b. Frey
c. Villars-Maitre-Chocolatier
Another creative idea would be to trade some of the brands/products to Mondelez for
the Toblerone brand.
EXHIBIT 29 provides details about the various brands owned by Lindt & Sprüngli. As an
ode to “The Blue Ocean Strategy” 74
, Lindt & Sprüngli’s North American operations are
reminiscent of a “3-ring circus”. Each brand has its own corporate office, one or more
factories, dedicated websites, different brand packaging, different advertising and
different store design and layout. All of these differences add cost compared to an
ideal case where all of the key products would share a common Lindt brand. When
Ghirardelli and Russell Stover sell more products, the Lindt & Sprüngli Swiss chocolate
manufacturing operations do not produce more chocolate and can’t benefit by
economies of scale.
There is also a hidden cost in that each of the regional brands report into a parent that
favors the global brand (>75% of sales). Their ability to pursue optimal strategies
based on their values, capabilities and opportunities is weakened.
A Harvard Business Review article written in 2004 suggests pruning the brand portfolio
can be beneficial:
“Many corporations don't realize that when they slot several brands into the
same category, they incur hidden costs because multibrand strategies suffer
from diseconomies of scale. Naturally, those hidden costs decline when
companies reduce the number of brands they sell. In fact, some businesses
have improved performance by deleting not just loss-making brands but also
declining, weak, and marginally profitable brands. They've used the resources
they've freed to make their remaining brands better and more attractive to

20
customers. Thus, killing brands may sometimes be the best way for companies
to serve both customers and shareholders.”75
AET1 This assumption is true and did not require additional data/research.
AST1 This assumption is true and did not require additional data/research.
ADT1 This assumption is true.
EXHIBIT 30 compares brand value of top 50 Swiss firms in 2016. Nestle, which is not a
premium chocolate firm (although they do have one premium brand called Cailler), is
#2 with a brand value of 8 billion CHF. Lindt is #13 with a brand value of 2.4 billion
CHF. No other Swiss chocolate firms were on the list.
The Swiss brands listed in EXHIBIT 31 do not appear to be a threat (and some could be
additional acquisition prospects).
 Teuscher Chocolates of Switzerland manufactures chocolate in Switzerland
(not sure if they have bean-to-bar process) but only has 12 North American
locations, 7 European and 7 rest of world retail store locations. 76
 Chocolats Halba appears to use a fair-trade bean-to-bar process, but they
seem to sell private label and to industry.77
 Confiserie Sprüngli AG operates 32 stores in Switzerland but they do not
manufacture the chocolate (Lindt & Sprüngli is one of their suppliers).78
 Toblerone is owned by Mondelez, but does not appear to have any retail
stores.
Since all of the assumptions were found to be true, the recommendations have the potential to create
value.

21
Addendum of Citations and Exhibits
Citations
1. http://www.lindt-spruengli.com/
2. “Swiss chocolate sees its magic melt”, Financial Times, April 12, 2017, Ralph Atkins, accessed
from: https://www.ft.com/content/1acfb746-1957-11e7-a53d-df09f373be87?mhq5j=e3 and “Lindt Sets
Sights on Godiva’s Crown in Luxury Chocolate”, Financial Times, March 8, 2016 by: Ralph Atkins in Zürich
3. Lindt & Sprüngli Group Presentation: 2017 CAGE Annual Conference, London, 20.3.2017
5. ibid.
6. Harris, Jared & Lenox, Mike. The Strategist's Toolkit. Virginia: Darden Business Publishing, 2013
7. “The Top 100 Candy Companies in the World in 2017”, accessed from
http://www.candyindustry.com/articles/87585-the-top-100-candy-companies-in-the-world-in-2017
8. ibid.
9. ibid.
11. https://pladisglobal.com/
12. Lindt & Sprüngli Group Presentation: 2017 CAGE Annual Conference, London, 20.3.2017
13. 2016 Ülker Annual Report
14. http://www.sees.com/
15. 2016 Rocky Mountain Chocolate Factory 10K
16. Various reports at http://www.lindt-spruengli.com/
17. Mergent Industry Report – Europe Food & Beverage Sectors - September 2016
18. ibid.
19. Dobbs, Richard; Manyika, James; Woetzel, Jonathan. No Ordinary Disruption: The Four Global
Forces Breaking All the Trends. New York: PublicAffairs, 2015
20. Mergent Industry Report – North America Food & Beverage Sectors - November 2016
21. ibid.
22. IBISWorld’s Chocolate Stores Market Research Report | NAICS OD5339 | Jun 2016
23. “Lindt Sets Sights on Godiva’s Crown in Luxury Chocolate”, Financial Times, March 8, 2016; by:
Ralph Atkins in Zürich
24. ibid.

22
25. “Pladis: Driven by global synergies, speed to market”; Candy Industry Magazine; Volume 182,
NO. 5, May 2017, pages 16-18
26. University of Virginia, Darden School Professors Jared Harris & Mike Lenox
27. ibid.
28. https://www.merriam-webster.com
29. http://www.godiva.com/
30. https://www.smithsonianmag.com/arts-culture/a-brief-history-of-chocolate-21860917/
33. 2016 Lindt & Sprüngli Sustainability Report
35. ibid.
36. 2016 Lindt & Sprüngli Annual Report
38. “Lindt Sets Sights on Godiva’s Crown in Luxury Chocolate”, Financial Times, March 8, 2016; by:
Ralph Atkins in Zürich
39. Chocoladefabriken Lindt & Sprüngli AG, Business Strategy in Practice WIP M1 by John Yannone,
November 2, 2017
40. http://www.lindt-spruengli.com
41. ibid.
42. “Godiva appoints former Starbucks exec as CEO”, by Alyse Thompson, accessed from:
https://www.candyindustry.com/articles/87820-godiva-appoints-former-starbucks-exec-as-ceo
43. ibid.
44. “See’s Candies to open, relocate stores in California”, by Alyse Thompson, accessed from:
https://www.candyindustry.com/articles/87807-sees-candies-to-open-relocate-stores-in-california
46. Dobbs, Richard; Manyika, James; Woetzel, Jonathan. No Ordinary Disruption: The Four Global
Forces Breaking All the Trends. New York: PublicAffairs, 2015
47. “Swiss chocolate sees its magic melt”, Financial Times, April 12, 2017, Ralph Atkins, accessed
from: https://www.ft.com/content/1acfb746-1957-11e7-a53d-df09f373be87?mhq5j=e3

23
49. Chocoladefabriken Lindt & Sprüngli AG, Business Strategy in Practice WIP M2 by John Yannone,
November 19, 2017
51. 2016 Lindt & Sprüngli Annual Report
53. Thaler, Richard, “Anomalies: The Winner’s Curse”, Journal of Economic Perspectives, Winter
1988, pages 191-202.
54. https://www.cnbc.com/2014/05/16/hershey-submits-1b-bid-for-russell-stover-wsj.html
56. https://www.ghirardelli.com/
57. http://www.caffarel.com/en
58. http://austrianchocolates.buyorderonlineshopping.com/?Hofbauer_Mozart_Chocolate
59. “Lindt & Sprüngli paid $1.6 billion for Russell Stover”, The Kansas City Star, by Mark Davis,
accessed from: http://www.kansascity.com/news/business/article13252067.html
60. https://www.extension.umn.edu/agriculture/dairy/milk-quality-and-mastitis/how-do-the-swiss-
produce-the-worlds-best-quality-milk/
61. Based on author’s visit to local Lindt store and Lindt USA website
63. Porter, Michael. Competitive strategy: Techniques for Analyzing Industries and Companies.
New York: Free Press, 1980
64. http://interbrand.com/views/money-chocolate-watches-the-leaders-of-the-best-swiss-brands/
65. Hitt, Ireland & Hoskisson. Strategic Management: Competitiveness and Globalization: Concepts,
Ninth Edition
66. https://journal-jger.springeropen.com/articles/10.1186/s40497-017-0068-0
67. https://www.ranker.com/list/best-chocolate-companies/ranker-
food?ref=collections&l=868633&collectionId=729
68. https://www.consumerreports.org
69. ibid.
70. ibid.
71. ibid.
72. http://www.foodandwine.com/slideshows/best-chocolate-us#1
73. https://en.wikipedia.org/wiki/List_of_bean-to-bar_chocolate_manufacturers

24
74. W. Chan Kim and Renee Mauborgne, Blue Ocean Strategy: How to Create Uncontested Market
Space and Make the Competition Irrelevant. Boston: Harvard Business Press, 2005
75. https://hbswk.hbs.edu/archive/the-right-way-to-kill-a-bad-brand
76. https://www.teuscherswisschocolates-sf.com/category-s/117.htm
77. https://www.spruengli.ch/cms/en/spruengli-world/history/
78. http://chocolatshalba.ch/en/products.html

25
EXHIBIT 1 & 2
Growing Sales and Profits Over a Long Period of Time
Source: 2017 CAGE Annual Conference Presentation

26
EXHIBITS 3 & 4
International Operations
Source: Lindt & Sprüngli Group Presentation: 2017 CAGE Annual Conference, London, 20.3.2017
Source: 2016 Lindt & Sprüngli Annual Report

27
EXHIBIT 5
Lindt & Sprüngli Brands

28
EXHIBIT 6
Lindt & Sprüngli’s Stores
Source: Lindt & Sprüngli 2016 Annual Report

29
EXHIBIT 7
About Lindt & Sprüngli
Source: http://www.lindt-spruengli.com/about-us/

31
EXHIBIT 9
Competitor-Analysis-Worksheet for the global confectionary manufacturing industry
Revenue, Plant and Employee data from www.candyindustry.com
Market share calculated from revenue data
ROA from www.morningstar.com
R&D from www.morningstar.com or company annual report
NOTES
Cadbury is a division of Mondelez
Godiva is a division of Pladis
$ amounts in Millions US
2016
REVENUES
MARKET
SHARE
#
Plants
#
Employees ROA
R&D
INVESTMENT STRATEGIC PARTNERSHIPS
Strategic Group (Candy/Chocolates)
Mars Inc. 18,000$ 13.6% 52 34,000 N/A N/A
Most of the partnerships discussed have to do
with marketing and online channel development
Mondelez International 12,900$ 9.8% 156 100,000 2.7% 376$
with marketing and online channel development
Ferrero Group 10,637$ 8.0% 22 33,245 N/A N/A
Partnership with EcoVadis to evaluate supplier
sustainability performance (www.ferrero.com)
Meiji Co. Ltd. 9,850$ 7.4% 7 10,805 2.1% 14$
Partnerships with dairy farmers in Japan
(www.meiji.com)
Nestle SA 9,138$ 6.9% 436 335,000 6.7% 1,736$
with marketing
Hershey Co 7,461$ 5.6% 18 22,000 13.3% 47$
with marketing
Pladis 5,200$ 3.9% 36 26,000 N/A N/A Nothing noteable
Lindt & Sprüngli 3,968$ 3.0% 12 13,000 6.6% 12$
with marketing and sustainable farming
development
Other firms 55,260$ 41.8%

32
EXHIBIT 10
Environmental Analysis
Demographic
Trends
1. Companies need to pay more attention to the needs of millennials, the most
influential consumer group, and make use of e-commerce for convenience
2. Growing populations in Asia-Pacific and emerging economies
o Food consumption will grow by 75% between 2007 and 2050, with 40% of the
demand coming from China, according to the Australian Trade Commission.
o The number of middle class consumers in the Asia-Pacific region will total 3.2
billion by 2030, the Organization for Economic Co-operation and
Development (OECD) forecasts.
o Japan has an ageing and dwindling population but remains a net importer of
food due to high labor and raw material costs.
Socio-Cultural
Influences
3. Consumers are getting more health conscious worldwide
o Despite the trend of healthy eating, confectionery sales remain strong as
American consumers still want to indulge
4. Demand for clean and vegan food products triggered the development of animal-free
food products and natural preservatives in the US
5. Two out of five US millennials do not trust large food manufacturers as they lack
transparency in product information
6. Higher disposable incomes and a burgeoning middle class in Asia-Pacific bolstered
international trade for many countries as consumers sought to improve their
lifestyles by buying healthier and premium foodstuffs.
7. Globalization has meant that western diets have been embraced by Asians.
Technological
Developments
8. Innovations in development and production of organic products
9. Claims of chocolate’s health benefits
Macroeconomic
Impacts
10. Strong Dollar, strong Euro
11. Low oil prices
12. Low milk prices due to global milk glut
13. Regulated sugar price increased 7% in Europe in 2016
14. US imposing restrictions on the import of sugar
Political-Legal
Pressures
15. Regulations for food safety and quality in US, Europe, Australia and Japan
16. Obesity, diabetes and healthcare costs
o obesity is a major cause of premature death, responsible for one out of seven
premature deaths in Europe (cancer and Type 2 diabetes linked to excess
weight)
o Several European governments have enacted “sugar taxes” in attempt to
combat obesity
17. abuse of human rights and environment concerns
Global Trade
Issues
18. The number of food entrepreneurs is growing and the ability to respond to the trend
faster than the larger firms gives them large consumer bases
19. Trans-Pacific Partnership abandoned by new President Trump
20. Brexit, the UK’s decision to leave the EU
Source: Mergent Reports and Company Annual Reports

33
EXHIBIT 11
Sugar Prices
Cocoa Prices
Sources:
http://www.nasdaq.com/markets/sugar.aspx?timeframe=10y
http://www.nasdaq.com/markets/cocoa.aspx?timeframe=10y

34
EXHIBIT 12
Milk Prices
Oil Prices
Sources:
http://www.nasdaq.com/markets/milk.aspx?timeframe=10y
http://www.nasdaq.com/markets/crude-oil.aspx?timeframe=10y

35
EXHIBIT 13
5 Forces Analysis for Premium Chocolates
Threat of Entry - Low
 Entrant faces high sunk
cost (specialized
equipment)
 Incumbents have
competitive advantage
due to brands and
accumulated technical
know-how
 Economies of scale
Bargaining Power of Suppliers -
Low
 Many suppliers
 Most raw materials are
commodities like Sugar,
Cocoa and Milk
 Price information for
commodities are readily
available
 Premium chocolate
firms buy cocoa beans
direct from farmers
Intensity of Rivalry = Mixed
 Many firms
 Good industry growth
prospects
 Unequal size
 Differentiated
Bargaining Power of Buyers -
Low
 Large number of buyers
 Low switching costs
Threat of Substitutes - Low
 Lower for premium
chocolates
 Higher for mass
produced chocolates
 Healthier alternatives
(i.e. snack bars)
 Low switching costs

36
EXHIBIT 14
Competitive Lifecycle Worksheet for Lindt & Sprüngli in the Chocolate Manufacturing Industry
PHASE TIMING SEVERITY
Disruption Mature phase is very long Incremental
Annealing Emergent phase is short Multiple designs (differentiated)
Shakeout Growth phase is long Contested
Overall Slow burn rate
Competitive Life Cycle (S Curve) of Lindt & Sprüngli Brands

37
EXHIBIT 15
Value Chain for Lindt & Sprüngli
Raw Material
Sourcing
Manufacturing
Operations
Product
Development
Distribution Marketing &
Sales

38
EXHIBIT 16
Lindt & Sprüngli Stakeholder Engagement
Source : 2016 Lindt & Sprüngli Sustainability Report

39
EXHIBIT 17
Capabilities Analysis for Lindt & Sprüngli

40
EXHIBIT 18
Diversification Matrix

41
EXHIBIT 19
Sales Growth Targets and Results
EXHIBIT 20
Non-adjusted Sales Growth Negatively Affected by Russell Stover
Source: Lindt & Sprüngli Investor Presentation HY2017

42
EXHIBIT 21
Lindt & Sprüngli in the overall chocolate industry
Source: Lindt & Sprüngli Company Presentation 2017

43
EXHIBIT 22
Lindt & Sprüngli policy on use of GMO food
Source: http://www.lindt-spruengli.com/sustainability/sustainably-consumed/health/

44
EXHIBIT 23
Lindt & Sprüngli Geographic Store Locations
Source: https://www.statista.com/

45
EXHIBIT 24
Global Consumption of Chocolate
Source: 2017 CAGE Annual Conference Lindt & Sprüngli Group London, 20.3.2017
EXHIBIT 25
Global Chocolate Forecast
Source: https://www.ft.com/content/1acfb746-1957-11e7-a53d-df09f373be87

46
EXHIBIT 26
Price data for various boxes of chocolate
Source of prices: Sampling of Target Corp website (https://www.target.com/) by author November 2017

47
EXHIBIT 27
Global Chocolate Brand Familiarity and Favorability
Source: https://journal-jger.springeropen.com/articles/10.1186/s40497-017-0068-0

48
EXHIBIT 28
The Best Chocolate Brands
Source: https://www.ranker.com/list/best-chocolate-companies/ranker-
food?ref=collections&l=868633&collectionId=729

49
EXHIBIT 22
Lindt & Sprüngli’s current form is full of dis-synergies
Source: Company websites, presentations and annual reports

50
EXHIBIT 30
Brand Value of Swiss Firms
Source: Statista

51
EXHIBIT 31
Why Switzerland?
Source: http://interbrand.com/views/money-chocolate-watches-the-leaders-of-the-best-swiss-brands/
Also the Swiss love chocolate…
Source: Lindt & Sprüngli Company Presentation 2017

Strategy Recommendation for Lindt & Sprüngli

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