New Product Development Strategy Analysis Of Chocoladefabriken Lindt & Sprüngli Ag

Introduction

The company which is analysed under this report is the esteemed Chocoladefabriken Lindt & Sprüngli AG most commonly known as Lindt which is a company that specialises in production of confectionaries. The aim of this report is to find a possible strategy for a new product development for this company and proposing it. In order to perform that, thorough analysis is done by business model canvas or value-proposition canvas. Browsing its current and top products and observing their reach among the public. Also, along that, few of its competitors are compared to it for observing the contrast among them. Since this is a well-known company, its background and its current objectives are noted as they are vital for any product development strategy. Their current product strategies will be analysed and critical thinking will be applied to it. The various products that are currently trending local ie. within New Zealand and also another comparison study is done with the product reception outside New Zealand ie. Foreign countries. New opportunities will be discovered in branches under the company where there are seldom or no new products and the potential probability of introduction of those products will be discussed. With the help of design-criteria model, a new product strategy is developed for the company.

The vital objectives that must be accomplished in this report are:

1. A food production company must be selected for analysing and development of a corresponding new product strategy.
2. This company must be then completely analysed in detail using the appropriate tools for possible new product opportunities.
3. Discovery of new trends relative to the company’s products here in New Zealand and also their trends in overseas counties.
4. Finding out where the potential areas within the company where the new product can be proposed in.
5. Develop a suitable new product strategy using the design criteria canvas.

Background

Lindt is a Swiss-based confectionery production company which was established in Zurich at Switzerland by a couple of brothers David Sprungli-Schwarz and Rudolf Sprungli-Ammann in 1845. This company provides a huge range of custom and unique chocolates in more than 120 countries across the globe. Lindt has its headquarter in Kilchberg which is a part of Switzerland and is known to have employed around an astonishing 10, 700 people by the end of the year 2014. It was known to have obtained a profit of approximately $500 million by 2014. Today, quality chocolate products by Lindt & Sprüngli are made at 12 own production sites in Europe and the USA. They are distributed by 25 subsidiary companies and branch offices, in more than 410 own stores, and also via a comprehensive network of more than 100 independent distributors around the globe. With over 14, 000 employees, the Lindt & Sprüngli Group reported sales worth CHF 4. 1 billion in 2017.

This group sells its variety of products under different names such as Lindt, Caffarel, Kufferle, Ghirardelli, Hoffbauer, Whitman, Russell Stover, and Pangburn’s. This huge organization consists of 12 operating manufacture plants, out of which 6 are present in European continent and the rest 6 are in the USA. It also operates across Canada, Australia, Eastern Asia, South Africa etc. During almost 175 years of Lindt & Sprüngli's existence, it has become known as one of the most innovative and creative companies making premium chocolate.

While tracing the history, during 1892, Lindt was the family business for the brothers and unfortunately was divided between them. David Robert obtained the couple of confectionery stores and Johann Rudolf got the iconic chocolate factory. During 1898, Johann Rudolf’s chocolate factory was converted into the Chocolat Sprungli Aktiengesellschaft which was also known as (CSA). It obtained the Berne-based factory and later the overall group was renamed to Aktiengesellschaft Vereinigte and Zurcher Chocoladefabriken Lindt & Sprungli. Then at 1930, this group’s name was changed to Chocoladefabriken Lindt & Sprungli which was widely popularised later.

The main vision of Lindt is to produce a product which is:

• Sustainably sourced
• Sustainably produced
• and Sustainably consumed.

The detailed explanation of the Lindt’s vision and their promises are analysed In the Company Analysis section below.

Company analysis

Lindt is currently one of the leading players in the chocolate manufacturing industries, mainly due to the fact that it focuses all its efforts only on chocolates and its varieties and no other products. The categories of production in Lindt includes a wide range of dark chocolates & milk chocolates. The excellence category of chocolates contains dark chocolates with an intensive 70%, 85%, 90% and 99% content of cocoa, and has luxurious taste additions such as caramel, salt, intense orange, chili and also other creamy flavours. The basis in which Lindt produces all of its products are the promises which it presents its consumers. When considering its sustainability in source, the raw materials that are sourced and packaged, are all from reliable sources and to assure the sustainability and the long term supply of these ingredients, Lindt and Sprungli is focused on building long term partnerships along with resource suppliers so that they could obtain the complete traceability of those materials. The sustainable packaging criteria is fulfilled because apart from obtaining quality materials and state-of-the art machines, Lindt & Sprüngli is working on the reduction of valuable energy and water usage. Responsible behaviour is conducted towards their employees, the environment, and the living communities in which people live in.

All these works are in the part of Lindt’s corporate culture. https://www. lindt-spruengli. com/sustainability/sustainably-produced/ When it comes to sustainable consumption, Lindt & Sprüngli takes up a responsibility to the customers and its consumers. Major Strict quality controls are taken up to ensure that their products meet high standards. Only after the company is convinced that the finished product is living up to its high standards and is in impeccable condition, it leaves the factory. Lindt is continuing its efforts in research & development, packaging and logistics, improvement cooperation with their trade partners to safeguard this quality all the way to their consumers. Lindt currently has an extraordinarily wide range of trends and varieties among its brands.

Lindt Novelties

Lindt Coconut Edition

Lindt celebrates summer season 2018 with a new and exciting limited edition where finest Swiss Lindt chocolate meets the trend flavour coconut. For this powerful promotion, the Lindt Master Chocolatiers have created three new hard-to-resist products for the top Lindt bestseller brands in travel retail: Lindor 400g, Lindt Assorted Napolitains 500g and a 300g Lindt Gold Tablet. The wide choice of three beloved Lindt products meets different traveller preferences, from gifting, sharing to self-indulgence. The attractive flavour, refreshing product design. New exciting products where finest Swiss Lindt chocolate meets the trend flavour coconut to celebrate summer with refreshing and unique tropical delights

95% Cocoa excellence Bar Lindt excellence

Prepared especially for you by the Lindt Master Chocolatiers who, from selecting the highest quality cocoa beans to creating the finest textures and tastes chocolate can offer, demand nothing less than Perfection. Lindt chocolate embodies the passion and expert craftsmanship of its Lindt Master Swiss Chocolatiers. Lindt delivers a unique chocolate experience offering a distinctly smooth and rich, gourmet taste.

Cat Tongues Cat Tongues are made with the finest chocolate in the unique shape of a cat's tongue. Lindt chocolate embodies the passion and expert craftsmanship of its Lindt Master Swiss Chocolatiers. Lindt delivers a unique chocolate experience offering a distinctly smooth and rich, gourmet taste.

Assorted Naps

Assorted naps are a new novelty for the Lindt chocolate as it embodies the passion and expert craftsmanship of its Master Chocolatiers. Lindt delivers a unique chocolate experience offering a distinctly smooth and rich, gourmet taste via these Assorted Naps.

Market Analysis

The market for chocolate production is wide and certain huge companies give a tough competition to Lindt ($4. 2B AR). Few of the main companies are;

Hershey ($7.8B)

Hershey produces chocolate, non-chocolate confectionery, mint and grocery products. The Hershey spends lots of money each year in R & D. along with the other trends that may end up more than a novelty. Just like many successful businesses, they look to cut edge all the time. It’s an original American chocolate company which is very insightful in nature. A chocolate trend which is generally more than just a trend but an expectation for Hershey. It is also aware of the current health conscious popularity. (Hershey's Chocolate Research, 18th Dec 2013).

Mars ($35B)

Mars generally manufactures and markets chocolates, pet food and other food products As it turns out, this big chocolate company Mars has spent millions of dollars for research funding and scientific studies that promotes the health benefits of cocoa and dark chocolate. This is a clear conflict of interest and also new for the large corporations which impacted “expert opinions” and “scientific data” previously. (Nieburg, O. , 2018).

Mondelez (25.9B)

Mondelez manufactures and commercializes packaged food products including snacks, beverages, cheese and groceries. Mondelez is a global snack powerhouse, with net revenues of about $30 billion in 2015. It spreads out to 165 countries. It’s one of the leaders in biscuit, chocolate and candy production with brands such as Oreo etc. , chocolates such Cadbury, Dairy milk and trident gum. It’s also a member of Standard and Poor’s 500, NASDAQ 100 and Dow Jones Sustainability Index. (Mondelēz International Invests in Global Research & Development Hub in India, 2018). Mondelēz International listed an investment of US$15 million to build a Research, Development & Quality (RDQ) hub at Maharashtra. This investment is part of the company’s strategy to provide an RDQ “Network of the Future” at 9 advantageous locations around the globe over next couple of years.

Ferrero ($12B)

Ferrero produces and markets chocolates, bakery products, snacks, spreads, mints and drinks. The Company Ferrero Rocher has few successful brands such as Kinder, Nutella, Tic Tac which helps the brand to support and grow into the market. It plays a major part in lifestyle of customers, increase in migration, stable economy, easy availability via the e-commerce channels and cosmopolitan culture are some of the factors which are proving as a catalyst for the growth of the Confectionaries market. Even though the local companies provide head-on competition to the international companies because of the better understanding of market demand pattern but still with the streamlined delivery channel the international companies try to change the taste and preferences of the companies. (Bhasin, H. , 2018)

Market Product Trends

Chocolate is one of the highly popular and consumed products in the world, where North America having the highest share, then Europe is the next. The range of chocolate products are available without any limits and the cakes and candy bars that is common is just scraping the surface. Dark chocolate is a product of high antioxidants that are believed to prevent few types of diseases, even cardiac diseases. These health benefits are the driving strong growth for product with the higher cocoa weightage. Instead of being something to stop or consider as a special treat, consumers are finding out several diets and even doctors recommend regularly consuming dark chocolate Premium and dark chocolate are strongest parts of the market in the USA in terms of growth, though not the market share.

Rare products and consuming experiences keep consumers from coming back for more. All over globe the drive for growth is the change in taste in certain Asian and Pacific countries. As consumers in these locations are growing and are more accustomed to “western styled” tastes, the demand for these chocolates are booming. These changing tastes & an increase of per capita income in China, India and other nations of the region have some analysts predicting a 30% increase in global cocoa demand by 2020. (Chocolate Industry Analysis, 2018).

Porter’s 5 Forces

Threat of New Entrants

Increase in allergies regarding dairy and nut have a bad effect on the cocoa and relatively chocolate production industry. The epidemic regarding obesity is also an unfavourable effect on sales within the chocolate industry. United Nations stated that the growing concern for the environment means that extensive investments should be done required so that there is adhesion to sustainable growing practices.

The Bargaining Power of Suppliers

Suppliers can exert power by peaking prices or reducing the quality of their product. Lindt prepared their own code of conduct, also an independent verification initiative for Ghanaian suppliers of products. According to United Nations, there has been difficulty in approval for large chocolate companies because of the large number of suppliers to filter from and also because of organisations like Fairtrade Foundation. Even though Lindt follows a code of conduct and also a verification initiative, lot like the Fairtrade Foundation and its suppliers are not regulated by an independent body. From the above, it is noted that the bargaining power of Lindt's suppliers is low.

The Bargaining Power of Buyers

According to the United Nations, the market the buyer market of cocoa products has increased alongside the concentration of the manufacturing segment Still Lindt company and few other producers consist a unique selling point for production of chocolate on higher quality. This results in reduction of producers potentially for buyers who stock luxury products of chocolate for their consumers. AS Lindt will provide additional customer value for buyers and it should be noted that it wouldn’t save money for the buyer. Considering the above points, the bargaining strength for buyers is classified as medium.

Threat of Substitute Products

There are many substitutes that are a threat for the chocolate industry, including; Biscuits, crisps, frozen dairy products. These products a threat because indulgent foods are based on customer preference The rise in obesity rate has led consumers to look for alternatives to chocolate, including both fresh and dried fruit as well as yoghurt and savoury snacks such as Popcorn, nuts, rice cakes, seeds etc. Certain Energy drinks also are substitutes as they have similar affects as chocolates such as providing energy by increasing insulin level with sugar (Curran. et. al. , ).

Competitive Rivalry

When the maturity of industry increases and the rates of growth changes, each actor attempts to gain advantage over the competitors. According to KPMG report on The Chocolate of Tomorrow, the vital triggers for rivalry in competition in the chocolate industry are due to consumer behavioural patterns. Consumers are segmented into three categories;

• The Convenience Buyer
• The Value Buyer
• The Luxury Buyer

It is known that competitive rivalry inside the chocolate industry is mainly because of many numbers of players and their reaction towards consumer behavioural patterns, needs and their wants.

PESTEL Analysis

New product opportunities & its strategy Lindt & Sprüngli Cup Cakes & Muffins

Manufacturers are including healthy ingredients in their cake products in order to gain competitive advantage. The sale of large cakes has been on the decline, as customers are favouring of smaller ones(Cake Market, 2018). MUST Health issues in line with the growing concern for obesity, other related diseases, and regulatory constraints pertaining to the product labelling pose a threat to the global cake market. The increase in home bakers further reduces the demand for packaged cakes. Food perishability remains a key challenge for the cake industry. The increase in online sales and demand for innovation would further help in cake market growth in the future. In addition to this, there is an increased demand for affordable, healthier and freshly baked cakes Based on the Market analysis of Lindt, it is very well known that it has a high quality in production of dark chocolates and milk chocolates.

Should

Lindt can provide a healthier range of cupcakes and muffins as they master in production of high percentages of dark chocolate (e. g. 75%, 80%, 85%, 90% etc. ). If the research and development team of this organisation can complete the hybrid healthier version development, the market for this new product would be wide and it would also be a new path to obtain market shares for the company. One of the highlights is that the competing market for the Lindt doesn’t coincide with pastries and cakes, so eventually the competitors for Lindt chocolates will be having less or no interference in the muffins and cake market. This can increase the total revenue and can also open up new opportunities for Lindt.

Could

Although the market for Cakes are on the rise, the global cake market is segmented based on flavours, product type, distribution channels, and geography. The chocolate cakes are preferred to other flavours, and contribute the most to revenue generation.

Don’t

Don’t in case of the new product that is developed should be the Price management, as the cakes industry is pretty new for Lindt and the companies which are already running the market have maxed out in efficiency and pricing, so if the price is not contained, the shares could go crashing and the product will be invalid at last. This New product which is developed could also attract the premium buyers as it has the high concentration of cocoa, this improvement may lead for it to become one of the top novel ideas as it contains both taste and the health factor to it.

Conclusion and Recommendations

Although Lindt is a well-known brand, when it comes to product varieties and affordability, it is still behind its competitors. The main reason seeming to be the shortage of New Product developments. Even though it seems to have a primary focus on only confectionaries, it also can succeed if the mentality of new product market reaches mainly because of its Global reach and also its customer loyalty. It is known that in the chocolate market, there are lots of health-related issues that seriously affect the sales of a luxury confectionary but in case of Lindt, there is an exception as it provides a lot of varieties of chocolates that are health conscious. There are gluten free chocolates, low fat content chocolates, low sugar content and mainly dark chocolates that contain a heavy cocoa content.

This is highly health beneficial as it can prevent cardiovascular diseases. Certain types of chocolates that come under the Premium category under Lindt poses a difficulty for consumers who have an average income as it is expensive compared to the other varieties in its own brand. Hence the moderate price maintenance for the types of chocolates in it is recommended. Lindt also can improve its seasonal varieties as it is known for its certain festival-based chocolate varieties such as the Golden Easter bunny, Spring baskets etc. Since it has a huge response and a fan base, more seasonal based chocolate varieties can be introduced (Schmidt, S., 2017).

With the analysis and information collected, the most suitable product that could be developed for Lindt would be Muffins and Cup cakes as Lindt can produce them as a smart product with health benefits and also the competing markets for chocolates would be of less interference and the companies which coincide will also not have a health friendly product. Hence Lindt & Sprungli Muffins and Cup Cakes would be an ideal product development scenario for a Company like Lindt as it doesn’t have to deviate from its confectionary principle but at the same time can expand its horizon to unexplored markets.