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Swiss chocolate profits melt away
11 February 2010 03:26 pm
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Swiss chocolatiers have been hit hard by the global economic downturn and say consumers are unlikely to redevelop a sweet tooth for the premium products in 2010.

According to Chocosuisse, Switzerlands association of chocolate producers, the industry in 2009 had to swallow losses for the first time in six years.

Sales of the associations 18 members last year were down 5.9 per cent to 174,109 tons. That is the equivalent of 110 million fewer Toblerone bars sold over the counter compared with 2008.

Total turnover dropped by 6.4 per cent to SFr1.7 billion ($1.59 billion), with sales both at home and abroad hit hard.

The fact that people worldwide have not lost their taste for the product overall, global chocolate sales fell only two per cent is a clear indication that consumers are not willing to pay a premium for Swiss bars and pralines.

Not even the Swiss.

Foreign-made chocolate, with low-price products leading the way, grew its share of the domestic market by nearly three per cent last year to 33.6 per cent.

But price, Chocosuisse said, was not the only reason for the poor results at home.

Sweet souvenir
Other factors hit profits, including above-average temperatures in spring and summer, which killed peoples lust for chocolate, and fewer tourists coming to Switzerland, which resulted in fewer purchases of chocolate souvenirs.

" In such difficult economic times, we wont systematically pass on the increases in production costs to consumers... "
Sylvia Klin, Lindt Abroad, the lower purchasing power of consumers was most evident in Germany, the most important market for Chocosuisse members. Germany accounts for nearly 14 per cent of all Swiss chocolate sold abroad but sales in the country were down nearly ten per cent.

This, according to Chocosuisse spokesman Franz Schmid, was not only due to the economic crisis but also the rise in the price of Swiss chocolate due to the countrys stronger franc.

Germans are still consuming chocolate but have been shopping at discounters, Schmid told swissinfo.ch.

Cocoa prices
The high franc, coupled with the steep price of cocoa, has not made it easier to sell a product that is already more expensive than the competition.

Cocoa prices reached a 33-year high in December and the International Cocoa Organization says there may be another supply deficit this year, keeping prices inflated.

This gives Swiss chocolate makers little room for price adjustments. In such difficult economic times, we wont systematically pass on the increases in production costs to consumers, but only occasionally, Lindt spokeswoman Sylvia Klin told swissinfo.ch.

Lindt, which claims to be Switzerlands largest producer in the premium segment, intends to combat the slump by investing more money in marketing and expanding its presence in markets like China, Japan and Russia.

But every cloud has a silver lining and in this case, it is the Gulf states, China and Australia.

Sales of Swiss chocolate to Saudi Arabia rose by 75 per cent last year, Schmid said. While this is only a drop in the bucket compared to Germany, Saudi Arabia is ranked 18th out of a total of 140 export markets.

However, the fate of the industry will rise or fall with the mood and disposable income of the Swiss consumer. The domestic market accounts for about a third of all Swiss chocolate sales.

Nicole Brndle, head of industry analysis at Credit Suisse, told swissinfo.ch that people in Switzerland are less willing to buy premium products like chocolate during an economic crisis. And as unemployment is expected to remain relatively high in 2010, Brndle said sales of premium foods are unlikely to improve this year.

swissinfo.ch, Dale Bechtel