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Tue July 15, 2014
Purchase Of Russell Stover May Enable Lindt To Do Something 'Creative' In Midwest
The Swiss chocolate maker Lindt will gobble up Kansas City-based Russell Stover. The acquisition may be kind of an odd pairing, but analysts say it could be a sweet deal for the Swiss company and possibly for American chocolate lovers.
Mr. Russell Stover started his boxed candy business with money he made helping to invent the modern ice cream bar. He brought it to Kansas City in 1931, where the company still has dedicated stores and a faithful following.
“Oh, my gosh, I come here, this is embarrassing, I come here every day,” said customer Jen Bustamonte at Russell Stover’s Fairway, Kan., store. “Every day.”
That’s the kind of loyalty that Jon Cox, an analyst with Kepler Cheuvreux in Zurich says made Lindt sweet on Russell Stover, and its half billion dollars in annual sales.
“Lindt has obviously taken over or announced it will take over something of an American icon,” said Cox.
Russell Stover, which also makes Whitman’s, is the third largest chocolate maker in the United States; after the merger, Lindt will be.
The exact terms of the deal aren’t public, but analyst Jean-Philippe Bertschy with Bank Vontobel says Lindt will spend something more than $1 billion for customers it might otherwise spend years wooing.
“It’s all about taste,” said Bertschy. “It’s always about consumer preference. And when you grew up with a specific chocolate, you will always go back to your child(hood) chocolate."
Bertschy says the United States, as a whole, goes through more chocolate than any other country, but chocolatiers see lots of headroom in the market, because per capita, Germans, French and Britons eat much more.
Lindt has grown substantially in the United States since buying Ghirardelli in 1998. And Bertschy says that Russell Stover’s 2,700 workers needn’t worry about losing their jobs in the merger.
“Lindt has been in past years always a growth company,” said Bertschy. “They like investing in stuff, investing in employees, so I don’t think this is really to cut costs and lay off employees, on the contrary.”
That’s partly because Lindt and Russell Stover make fundamentally different products.
Rene Bollier is a third-generation chocolate maker in Kansas City. His family owns André's Confisierie Suisse, a high-end Swiss-style place just a few blocks from Russell Stover’s headquarters. He loves Lindt’s premium chocolate, and says Russell Stover’s product is, well, sweet.
“One could almost be fast food, and one would be fine dining,” said Bollier, comparing Russell Stover to Lindt. “One is a total experience, it just leaves you wanting more. And one gives you your fix quick, but it doesn’t leave you wanting anything."
The purchase isn’t going to leave Lindt wanting for production capacity or U.S. distribution. Russell Stover runs four factories, and ships to more than 70,000 stores. Bollier says he hopes the influx of Swiss money and know-how will shake up the U.S. chocolate industry.
“It does enable Lindt to come into the Midwest and maybe do something really creative," predicts Bollier. “I hope so.”