Key facts
- Lindt & Spruengli AG is being sued in the US over allegations of child labor in its cocoa supply chain.
- The lawsuit claims Lindt falsely advertises its sustainability efforts and fails to prevent child labor.
- Reports of prohibited child labor practices have surfaced among Ghanaian cocoa farmers supplying Lindt.
- Lindt has stated it condemns child labor and will investigate the claims.
- The company reported strong financial results for the first half of 2023, with sales up 10.1%.
Lindt & Spruengli AG, a prominent Swiss chocolate company, is facing a lawsuit in the United States filed by activist law firm International Rights Advocates. The suit alleges that Lindt falsely promotes its efforts to combat child labor in Ghana and the Ivory Coast, from where it sources cocoa.
The complaint, filed in a District of Columbia court, asserts that Lindt continues to profit from child labor while doing insufficient preventative measures, thereby misleading consumers. This legal challenge comes amid reports from Swiss TV and Radio news programme Rundschau highlighting prohibited child labor practices among Ghanaian cocoa farmers, whose produce allegedly reaches Lindt.
Lindt has responded by stating that it condemns child labor and intends to investigate the allegations, emphasizing its reliance on suppliers for cocoa sourcing verification. Swiss business lawyer Peter V Kunz suggested that the company's board of directors could face liability questions and potential lawsuits from abroad if mistakes were made.
Financially, Lindt reported a successful first half of 2023, with organic sales growing by 10.1% to CHF 2.09 billion, operating profit (EBIT) reaching CHF 255.0 million, and a net income of CHF 204.5 million. However, analysts at LD Investments note that 2024 profitability may be impacted by rising material costs, particularly cocoa prices which exceeded $4,000 per metric ton in November 2023, their highest in over 45 years. The company's effective tax rate is also expected to increase to about 23%-25% medium term.
Despite these challenges, LD Investments views Lindt favorably for the medium to long term, citing its global presence, strong brands like Lindt and Ghirardelli, and leading position in the premium chocolate market. The company targets revenue growth of 6–8% and an improvement in operating profit margin of 20–40 basis points annually.