Chocoladefabriken Lindt & Sprüngli AG

Seestrasse 204
CH-8802 Kilchberg
Switzerland
(41)(1) 716 22 33
Fax: (49)(1) 715 39 85
Web site: http://www.lindt.com

Public Company
Incorporated: 1845 as David Sprüngli et fils Societal
Employees: 4,599 (1997)
Sales: CHF 1,344 million (1997)
Stock Exchanges: Zurich
Ticker Symbol: LISP
SICs: 2066 Chocolate & Cocoa Products

Chocoladefabriken Lindt & Sprüngli AG is one of the world’s leading manufacturers of premium chocolate and chocolate-related products sold in more than 80 countries, with almost $1 billion in worldwide sales. The predominantly Swiss-owned corporation manufactures various products of its renowned Lindt brand in Switzerland, Germany, France, Italy, and Austria, as well as in the United States. The international group includes major sales and distribution firms in England, Poland, Spain, Canada, and Australia, as well as sales offices in Buenos Aires, Hong Kong, and Dubai. Lindt & Sprüngli products are distributed by a network of distributors that spans the globe.

The Origins of a Chocolate Empire

Lindt & Sprüngli’s origins go back to a small confectionery shop in the Old Town of Zurich. In 1820, David Sprüngli, a poor orphan who had assisted a few Zurich confectioners, started an apprenticeship at the reputable shop. When both the master confectioner and his son died in 1836, the widow sold the house and confectionery shop to David Sprüngli. Within eight years Sprüngli paid off half of his debt. In March 1845 he and his 29-year-old son Rudolf, who had gathered experience as an apprentice in confectionery businesses abroad, announced the opening of a new chocolate factory named David Sprüngli et fils Societät.

At first, they manufactured chocolate in solid form in a small workshop they set up in the old store building, equipped with two hand-driven machines: a small roasting unit and a grinding machine. But soon the old bakery became too small to meet the demand for the new delicacy they were making from a fashionable new Italian recipe. As a result, the chocolate production was moved to a small facility in Horgen at the northern end of Lake Zurich in 1847. Sprüngli invested in machinery for processing cocoa beans and the new factory soon employed ten people. One of their tasks was to sort stones and nails out of the raw cocoa beans that traveled by boat and rail from Dutch ports to Zurich. In 1859 a second, more spacious confectionery and refreshment room was opened. At the elegant establishment, members of Zurich’s high society sat at marble tables and enjoyed coffee or hot chocolate while they waited for the Sprüngli delicacies they had purchased to be packed. Between about 1860 and 1880, the Sprüngli company’s diverse product range included an assortment of 20 chocolate bars of different quality, from “Economique” to “Chocolat du Cremier.”

Second Sprüngli Generation Manages Expansion

In 1862 David Sprüngli died at age 86 and Rudolf Sprüngli, formerly the junior boss, took over management of the entire business. After a new boulevard was built on Zurich’s Parade-platz where the second Sprüngli store was located, the business found itself in the center of a new thriving area, surrounded by a luxury hotel, a bank, and the Stock Exchange. The chocolate production was moved again in 1870 to the Werdmühle in Zurich, a much bigger facility in a central location that included workshop buildings, warehouses, a canal that supplied water to the complex, and a residence for the Sprüngli family. A decade later, the Sprüngli factory employed about 80 people—confectioners, mechanics, carriers, salesmen, and teenage girls 15 and older, who wrapped the expensive delicacies in rich “glazed” paper. By 1882 Sprüngli chocolate bars, pastilles, croquettes, and pralines were exported to Germany, Austria, Hungary, Belgium, Italy, Rumania, Denmark, Sweden, Norway, Turkey, and even eastern India.

When Rudolf Sprüngli retired from the business in 1892, his younger son, David Robert Sprüngli, received the two confectionery stores, while the elder son, Johann Rudolf Sprüngli-Schifferli, was given the chocolate factory. Johann Rudolf first expanded the production facility and invested in state-of-the-art machinery that sorted, roasted, and crushed the cocoa beans better and cheaper than before. Around 1890 the Sprüngli company launched “Alpina, Chocolat au lait.” This milk chocolate was manufactured according to a process that Daniel Peter, another Swiss chocolatier, had invented in 1875. The new technology replaced half of the cocoa used before in chocolate by condensed milk. Consequently, Swiss chocolate makers’ dependence on cocoa imports shrunk, since milk was a traditional product of Switzerland. Sprüngli’s marketing and new product manager at that time, Carl Georg Bernhard, launched and professionally marketed other early innovations. One was saccharin cocoa for diabetics, which was first test-marketed to doctors and pharmacists in a single Swiss town. Another was acorn cocoa, a mixture of cocoa and ground acorns with less oil marketed as health food.

After his father died in 1897, Johann Rudolf Sprungli-Schiffeli realized that the Werdermühle facility was still too small for his ambitious plans. To be able to raise money for a new plant, the sole proprietorship was transformed into a joint stock company in 1899 under the new name Chocolat Sprüngli AG. In the years 1898 and 1899 a new factory was built under his leadership in Kilchberg at Lake Zurich. During the following decade, sales rose by 250 percent. But more than expanded production power contributed to this growth.

Entering the 20th Century with New Partners

In 1899 Chocolat Sprüngli acquired a small but famous Berne chocolate maker, Rod. Lindt fils. Entrepreneur Rodolphe Lindt, the 24-year-old founder of the company, had invented a new technology while experimenting with old machines he had bought from a bankrupt spice mill. By rolling the cocoa in the trough for a very long time and adding cocoa butter to the right mix of cocoa beans, he developed a new kind of chocolate superior to the other chocolate available at the time, which was a somewhat bitter paste with a coarse, sandy consistency. In the 1880s Lindt developed a shell-shaped trough and a fitting roller. Running back and forth in the partly covered trough for as long as 72 hours, the roller homogenized the sugar and cocoa particles through the internal warming it created, covered them thinly with cocoa butter, and mixed the resulting mass with little air bubbles that released unfavorable bitter flavors into the air. This machine was later called a “conche” and became the basic equipment for chocolate production. Although demand for the new “melting chocolate” rose rapidly and waiting periods for customers became longer and longer, Lindt was not interested in expanding production at his own risk. For 1.5 million Swiss francs—an enormous sum at that time—and a seat at the board of directors Lindt sold his business to the Chocolat Sprüngli AG. Sprüngli acquired rights to the Lindt brand name, which had a reputation throughout Europe, together with the secret to manufacturing so-called “melting chocolate.” The Sprüngli company’s name was changed to Aktiengesellschaft Vereinigte Berner und Züricher Chocoladefabriken Lindt & Sprüngli.

The two component companies actually were run like separate businesses, however, and serious differences arose between the managing members of the Lindt and the Sprüngli families. In the business year 1902-03, the Lindt factory in Berne produced about 40 percent of the total Lindt chocolate output, and 60 percent was made in the Sprüngli plant. But Lindt chocolate was more expensive than Sprüngli’s. The Lindt facility’s output represented 13 percent of total production, but 26 percent of total sales. When Rodolphe and his brother August Lindt built another factory in Berne as their private facility and rented it to Lindt & Sprüngli, the board of directors approved this arrangement. However, in July 1905 Rodolphe Lindt canceled the rental agreement and resigned from all duties at the Lindt & Sprüngli company in September. In April 1906, August and Walter Lindt, a cousin of Rodolphe Lindt, founded their own firm in Berne, thereby breaching their contracts with the Lindt & Sprüngli company.

Robert Stunzi-Spriingli, a hardheaded cotton broker from Basle who had taken over the management of Lindt & Sprüngli in 1906 after Rudolf Sprüngli’s retirement, led the firm through the following legal battle. It lasted more than two decades. While the court machinery moved slowly, Lindt & Sprüngli launched costly advertising campaigns to defend their markets from the competitor who used the famous “Lindt” brand name illegally. In the summer of 1927 the Berne Appeals Court sentenced the A. & W. Lindt company to a high fine and ordered them to print “This chocolate is not the original Lindt chocolate” on all of its packages, ads, and correspondence. One year later the firm A. & W. Lindt was liquidated after a settlement was agreed on by the heirs of the two founders, who had died in the meantime. Rodolphe Lindt, who had died in 1909, lived on in the Lindt & Sprüngli company, however. His secret recipes have never been revealed.

Company Perspectives:

We are an international company and are recognized as the leader in the market for premium quality chocolate and chocolate related products of superior quality and value. Our working environment attracts and retains the best people. Our partnership with our consumers, customers and suppliers is mutually rewarding and prosperous. We want to be recognized as a company which cares for the environment and the communities we live and work in. The successful pursuit of our commitments guarantees our shareholders an attractive long term investment and the independence of our company

Surviving Economic Depression and World Wars

While the legal battle was being fought, the Swiss chocolate industry enjoyed two decades of growing sales, especially in foreign countries. The boom continued through the First World War; Lindt & Sprüngli, which was only a medium-sized company compared with other Swiss chocolate makers, participated in it wholeheartedly. Lindt & Sprüngli exported 72 percent of its products to 20 countries in 1915-16. In all, sales doubled between 1914-15 and 1919-20. Low trade activity and protectionism resulting from the global depression in the 1920s and 1930s, however, caused a steady erosion of foreign markets. In 1922-23 sales plummeted to half of what they had been in 1919-20. In 1927 Lindt & Sprungli’s general agent in Germany, the company’s largest export market before the war, went bankrupt. One year later, the Schokoladenfabrik Lindt & Sprüngli AG Berlin was founded as a joint venture with the British Rowntree and Co. in York, Lindt & Sprungli’s first foreign partner. In 1930 the firm’s name was changed again to the simpler Chocoladefabriken Lindt & Sprüngli AG. Exports of Swiss chocolate makers dropped by 87 percent in 1932. In the following years the Lindt & Sprüngli factory in Berne was closed down, and the Lindt subsidiaries in Great Britain and Germany were changed into licensees. Costs for all raw materials shot up, the Swiss currency was devaluated significantly due to inflation, and consumer prices were frozen by the Swiss authorities. By 1937 Lindt & Sprungli’s export share had sunk to only nine percent of total sales.

When the Second World War began, the company had only its domestic market. Although prices remained high for cocoa and sugar, limited supplies were secured through imports monopolized by the government. In newly developed products, almonds and nuts replaced a good portion of cocoa, and the Lindt brand name more and more replaced the Sprüngli brand name. In 1940 Lindt & Sprüngli started paying their work force cost-of-living allowances, which rose from 4.5 percent of total pay in 1940 to 26 percent in 1944. In addition, so-called autumn allowances enabled Lindt & Sprüngli employees to buy food and fuel for the winter. From 1943 until 1946, chocolate was rationed in Switzerland to 100 grams per person per month. Despite dwindling sales figures, Lindt & Sprüngli survived—primarily because of the management’s total commitment to premium quality. Arthur Weber, Lindt & Sprungli’s first sales manager, launched an advertising campaign in 1944 to keep the Lindt brand name in customer’s minds while supply and demand was rationed. Every ad in various magazines began “When peace comes again.”

An International Group After World War II

When peace did come again, the explosion of domestic and foreign markets once more challenged Lindt & Sprungli’s production and personnel capacity. Except for the subsidiary in England, the company was not successful in its attempt to establish facilities outside of Switzerland prior to the two world wars. Now, with worldwide demand rapidly growing, new attempts to expand internationally bore fruit. In 1947 a new licensing agreement was concluded with S.A.A. Bulgheroni & Figli, an Italian company. Other licenses were issued to companies in Germany, France, Holland, Sweden, and Denmark in the following years. Supported by a period of worldwide economic boom, Lindt & Sprüngli entered an unprecedented period of growth under the new leadership of Rudolph R. Sprüngli, son of Robert Sprungli-Baldassari, the previous chairman from 1958 until 1962. Annual chocolate consumption increased steadily as the world economy recovered—in Switzerland alone from 3.0 kg in 1930 to 6.9 kg in 1960. Between 1961 and 1971, Lindt & Sprüngli acquired three Swiss companies. The Chocolat Grison AG in Chur, another chocolate maker, was integrated and modernized as a new production facility for Lindt & Sprüngli. Nago Nährmittel AG of Olten first agreed to produce cocoa butter and cocoa powder for Lindt & Sprüngli. The partners invested in a fully automated production facility and a 56-meter-high storage tower for cocoa beans and sugar, with a capacity of 3,000 tons. In 1971 Lindt & Sprüngli took over the Nago Nahrmittel AG. The facility in Olten later became the exclusive provider of cocoa mass in fluid form for all Lindt & Sprüngli production facilities in Switzerland, Germany, and Italy. Also in 1971, Lindt & Sprüngli bought the Gubor Schokoladefabrik G. Uebersax in Langenthal, where the Central Switzerland distribution center was set up. To finance the takeovers, share capital was increased from eight to ten million Swiss Francs.

In 1972 Lindt & Sprüngli pioneered chocolate production technology in different ways. First, the so-called “Lindt & Sprüngli Chocolate Process” (LSCP) developed by the company’s R&D engineers reduced processing time by more than 90 percent, down to eight hours, by pretreating the broken cocoa kernels with a water-based solution before they were mixed together with the other ingredients and refined in modernized conches. Extensive testing showed no difference in product quality. The new technology also used less energy and space. The technology was adopted later by other large chocolate makers. In the same year, a fully mechanized packaging line capable of correctly placing various pralines into 50 single layer boxes per minute was installed. In addition, innovative technologies for cooling and reheating the liquid chocolate mass and for making liqueur pralines were introduced. As a result, production capacity was quickly increased by 50 percent and Lindt & Sprungli’s sales hit 100 million Swiss Francs for the first time in 1972.

From the Second World War until 1980, about 80 percent of Lindt & Sprungli’s production was sold in Switzerland. The next step toward building an international group was taken when Lindt & Sprüngli bought 65 percent of the share capital of the French licensee CFC Consortium Francais de Confiserie in 1977 from the Perrier mineral water group. In 1983 a newly built central storage and distribution center was opened in Altendorf on Lake Zurich. Shelves measuring 15 meters high provided room for 11,000 double palettes, and direct rail connections from Altendorf to Kilchberg and Olten were opened in 1986. In the same year, the German Lindt operation became a wholly owned subsidiary. Two years later, the associated factory site also became part of the new German Chocoladefabriken Lindt & Sprüngli GmbH in Aachen. In 1986 share capital was increased to CHF 14 million when Lindt & Sprüngli shares were first quoted on the Stock Exchange in Zurich. Also in 1986, Lindt & Sprungli’s subsidiary in the United States, Lindt & Sprüngli Inc., which had existed in New York since 1925, was reactivated; one year later it was made responsible for the American market as Lindt & Sprüngli (USA) Inc. In 1989 Lindt & Sprüngli (USA) Inc. started production in a newly built facility with storage and office spaces in Stratham, New Hampshire, a $10.5 million investment. Three years later, Lindt & Sprüngli S.A. in France became a fully owned Lindt & Sprüngli subsidiary.

Geographical Expansion in the 1990s

In 1992 the German Lindt & Sprüngli subsidiary already employed more personnel and was responsible for more sales than the Swiss parent company. Consolidated group sales amounted to CHF 1,065 million, with both Germany and France accounting for about 30 percent and Switzerland accounting for another 15 percent of the group’s total. In 1993 the long-term licensee, Bulgheroni SpA of Induno Olona, Italy, was acquired by Lindt & Sprüngli and given the new name Lindt & Sprüngli SpA. Thereby, all former licensees were integrated in the Lindt & Sprüngli group as fully owned subsidiaries. One year later, Lindt & Sprüngli expanded further into Austria by acquiring the famous Confiserie-Group Hofbauer in Vienna. It was integrated into the newly founded Lindt & Sprüngli (Austria) Ges.m.b.H., which was moved from Salzburg to Vienna, where both sales forces were merged.

Also in 1994, under the leadership of former Johnson & Johnson manager Ernst Tanner, who came to Lindt & Sprüngli in 1993 and was elected to the board of directors in the same year, the Lindt & Sprüngli group was restructured to encourage further international growth. As a management holding company, Chocoladefabriken Lindt & Sprüngli AG (International) in Kilchberg owned 100 percent of all subsidiaries and manufacturing sites in Switzerland, Germany, France, Italy, Austria, the United States, and selling firms in many other countries. The former parent and manufacturing plant was now responsible for production and sales in Switzerland and export markets, and its name was changed to Chocoladefabriken Lindt & Sprüngli (Schweiz) AG. A new International Sales department was created to market Lindt brand products to international corporate customers. By the end of 1994, more than 80 percent of Lindt chocolates were sold abroad. In 1997 the Lindt & Sprüngli group acquired Caffarel of Turin, an Italian chocolate manufacturer with a long tradition. In January 1998 the acquisition of the Ghirardelli Chocolate Company, founded in 1852 and based in San Leandro, California, became effective. With that move, the Lindt & Sprüngli group significantly improved its position in the world’s largest chocolate market, since Ghirardelli Chocolate traditionally dominated the western part of the United States, while the Lindt brand was well established in the eastern part. In 1998 sales in Italy and the United States contributed one quarter of the group’s sales, which reached CHF 1.344 billion in that year.

Finally, distribution of Lindt products was expanded and diversified. A new distribution company was founded in Australia in 1997. Joint ventures were set up with the Swiss and German Post Office to launch a new gift service that enabled customers to send Lindt chocolates to addresses worldwide between September and May. The service takes a summer break because of concerns about quality. In 1998 Lindt & Sprüngli added online shopping to their web site. Over 60 “Lindt Shops” had been opened by late 1998 in the eastern parts of the United States. Future efforts pointed toward direct sales to corporate customers in existing markets and opening up new ones, especially in Eastern Europe.

Principal Subsidiaries

Chocoladefabriken Lindt & Sprüngli (Schweiz) AG; Chocoladefabriken Lindt & Sprüngli GmbH (Germany); Lindt & Sprüngli SA (France); Lindt & Sprüngli SpA (Italy); Caffarel SpA (Italy); Lindt & Sprüngli (Austria) Ges.m.b.H.; Lindt & Sprüngli (USA) Inc.; Ghirardelli Chocolate Company (U.S.; 98%); Lindt & Sprüngli (UK) Ltd.; Lindt & Sprüngli (Canada) Inc.; Lindt & Sprüngli (Espana) SA; Lindt & Sprüngli (Poland) Sp.z o.o.; Lindt & Sprüngli (Asia-Pacific) Ltd. (Hong Kong); Lindt & Sprüngli (Australia) Pty. Ltd.