When Brand Loyalty Is Not Enough
Lindt’s stock is down 40% over the past two years, reflecting serious problems caused by price hikes. This is not an isolated case, but symptomatic of the entire industry.
Whether it’s chocolate, chips or cola, pricing power in branded consumer goods has reached its limits. Quite simply, consumers are no longer willing or able to pay these inflated prices, brand loyalty notwithstanding. I expect these challenges to persist for the foreseeable future.
In my view, the sector is therefore fundamentally impaired, and a sustainable recovery will be difficult to achieve. Whether this creates a contrarian buying opportunity is debatable. Personally, I’m not betting on it at this point.