Swiss chocolate profits melt away

Lots of choice, but little lust for chocolate Keystone

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, Switzerland’s association of chocolate producers, the industry in 2009 “had to swallow losses” for the first time in six years.

Sales of the association’s 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 people’s lust for chocolate, and fewer tourists coming to Switzerland, which resulted in fewer purchases of chocolate souvenirs.

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 country’s 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 won’t systematically pass on the increases in production costs to consumers, but only occasionally,” Lindt spokeswoman Sylvia Kälin told swissinfo.ch.

Lindt, which claims to be Switzerland’s 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 Brändle, 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, Brändle said sales of premium foods are unlikely to improve this year.

swissinfo.ch, Dale Bechtel

Bittersweet results

Sales of Swiss made chocolate were down in 2009 by 5.9% compared to 2008. Turnover dropped by 6.4% to SFr1.7 billion.

Domestic sales amounted to 68,375 tons last year – a decrease of 6.9%, with foreign sales down 5.2% to 105,734 tons.

Germany was able to keep its top position among export markets even though chocolate sales to Switzerland’s most important trading partner dropped by 9.7%. Germany accounted for 13.8% of sales abroad, followed by Britain (12.8%), France (10.8%) and the United States (7.0%).

Chocolate inventions

Although various breakthroughs in the technique of chocolate processing came from manufacturers all over Europe and the United States, the Swiss were responsible for several of them.

The following achievements are all claimed by Swiss chocolate makers:
• The invention of the mixer which combined sugar and cocoa powder
• The invention of the conch which made much smoother chocolate
• The tempering process, to prevent the formation of crystals on the surface of chocolate
• Hazelnut chocolate
• Milk chocolate
• Filled chocolate

Source: swissworld.org