Lindt Aktie

Hello, everybody here in Kilchberg, and hello, more than 100 participants online. Welcome to the Full Year Results Presentation of Lindt & Sprungli 2025. I will walk you quickly through the highlights of 2025, and we'll have a deeper look at the regional performance. Then I hand over to our CFO, Martin Hug. He will give us an explanation on the financial results and explain the progress that we made in sustainability.

And then I will outline our growth agenda and the outlook for this year and for the years to come. And then we will open the floor for question and answers. We grew 12.4% last year. This was the strongest organic sales growth with the exception of the recovery after COVID. We achieved CHF 5.9 billion turnover. We improved our EBIT slightly by 20 basis points to 16.4% or CHF 971 million.

Our earnings per share increased by 8.5%. Our free cash flow was in line with our expectations, slightly lower than our long-term guidance at 7.5% due to the higher value of the inventories. We operated in a challenging environment. It's not a surprise for any one of you, the cocoa price volatility forced us for the last 4 years to increase our prices overall in the area of more than 40%.

Geopolitical tensions had an impact on consumer sentiment. Global trade wars and tariffs also gave us a tough time -- do the calculations. And we saw a clear consumer behavior change. Consumers had to tighten the belt and consumer sentiment, as mentioned, was weak across the globe. We continue to ramp up our global expansion. We -- as you know, we generate 87% of our sales in Europe and in North America, and we bring out the seats to cover the white spots on the map.

So we opened branches in Bulgaria, signed a joint venture in Saudi Arabia, opened subsidiaries in UAE, in India, created a logistic hub in China to shorten the supply chain, create hubs for co-packing so that we are more flexible and can sell fresher products. And we signed an agreement with a retail operator in Malaysia, and we will see results pretty soon there.

Our Global Retail division in general was again once more a growth engine of our company with 20.8% growth, mainly driven by comp store growth, so like-for-like growth in the existing stores, but also benefiting from the expansion and opening of 53 new stores. So altogether, our store network is now 621 stores globally. We opened not only more stores, but also premiumized and upgraded our stores.

This means bigger stores in more prominent locations. The best examples were, for sure, the Piccadilly Circus store that we opened in March last year and in autumn, in Vienna, 500 square meter stores in the best location, Karntnerstrasse on 2 floors with very promising results. And as mentioned, we also enter into new countries with our retail division as a spearhead. With Dubai Style Chocolate, we were the first big chocolate company to react to a global social media hype.

So we really could prove the agility of our organization, and it resulted in the biggest innovation ever in our Group, not only under Lindt, but you can see also Ghirardelli and also Russell Stover launched products in -- with the Dubai Style recipe and Ghirardelli even launched Dubai Hot Fudge Sundae, which is today the #1 seller in our Ghirardelli Coffee stores. The story goes on.

In this year, we extended the range already with different recipes with dark and white recipes and the latest launch is an extension of the city range Tokyo Style Chocolate with Strawberry Matcha. Also this started with very promising results first in our retail stores and now also in the grocery stores in the wholesale. What it did to us this Dubai Style Chocolate was a clear contribution to strengthening our brand equity.

It made us more relevant with the Gen Z. So with the younger target group, we see it in our retail stores. We see it also when we analyze the consumption data. So altogether, it was not only incremental sales, but it was also a clear signal to the consumers that this is a dynamic brand and open to launch also very exotic recipes. Coming to the regional performance, you see that 50% is generated in Europe, and we grew with 15.3% above our expectations in the most established markets with the highest market share.

So that makes us also confident that we certainly did not reach a platform anywhere, but we can increase our market share also in well-established markets. When we come to North America, you remember that in the first half, we published very soft start last year with 3.5%, and we were pretty nervous even if we knew that we have a strong -- that we have strong plans for the second half, but then we grew double-digit in the second half.

And with 8.9% organic growth in North America, we clearly outperformed the market and gained market shares. Rest of the World with 11.7% growth, slightly below our expectation. I will come to this later in when we tackle the individual regions. When it comes to Europe, for the first time, we saw double-digit growth across all countries in Europe. You can see in our big countries, Germany, France, U.K., Italy, Switzerland, growth rates between 12% and 15%.

So this is really unprecedented. It also shows that the brands are well-established. The price increase led to a relatively low price elasticity, and we could really translate these price increases into growth. We saw even higher growth rates in CEE, Iberia, Austria, Nordic, Benelux, all between 20% and 30%. Key growth drivers were on the one side, our dark tablets, Excellence tablets.

We saw growth rates significantly above the total growth rate that we enjoyed in Europe. And we saw growth -- strong growth on all recipes that were centered around Pistachio. We had Lindor Pistachio, [ Balls ] Lindor Pistachio tablets. We have Excellence Pistachio. And of course, we have the Dubai Style Chocolate and this megatrend around Pistachio really boosted the sales of all products that offered pistachio recipes. Retail expansion, the biggest share of our retail division is also located in Europe.

And as mentioned here, not only the flagship stores, but also regular stores were opened and contributed to the strong growth in Europe. Coming to North America, with 16.2%, we had an outstanding growth rate at Ghirardelli. Ghirardelli benefited from a trend that people consume less out-of-home, more in-home. And the trend to baking in in-home was beneficial for Ghirardelli as we are the #1 for baking chips.

So we had growth rates above 30% in this baking category, and this resulted in a 16% growth for Ghirardelli. Lindt USA, as mentioned, with a soft start, they had a very strong success with the Dubai Style Chocolate in the second half. So they could catch up to 9.4%. Russell Stover, once more, unfortunately, a disappointing year. The price increase led to hefty discussions with retail partners, and they partly reduced the volumes for Valentine's Day, et cetera.

It resulted in a 6% decline of sales in Russell Stover. Canada, 8.8%, in line with expectations. Mexico, these were some onetime impacts of inventory evaluations, et cetera. This is temporary, and we will see good results again in this year. Coming to the Rest of the World, you can see we had problems with our distributor business. We indicated it already last year at the Half Year Presentation.

The strong Swiss franc forced us to -- and distributors are -- we sell the products on a Swiss franc basis. So this forced us to increase prices even above Group average and many distributors were reluctant to implement these strong price increases. So we had long discussions in the first half. In the second half, we grew double-digit again. So I think we go with a strong momentum also into '26.

But altogether, of course, this minus 2.2% dragged down the total growth rate of Rest of the World, while all the other countries showed similar growth rates like in Europe, especially Japan and Brazil, where we have strong retail divisions, close to 20%. China also encouraging with the new setup in logistics at a 20% growth rate. South Africa, certainly a market with a low purchase power where we still were able with our price increases to grow 13%.

Global Travel Retail, we were -- had a very strong presence with Dubai Style Chocolate in global travel retail, and we really saw it was a best seller from Buenos Aires to India everywhere where we offered it. And Chile, this is from a very low base. We opened 6 stores in Chile, and we have a plan to roll out to 20 stores like we have in many countries now in Latin America as well as in Middle East and in Asia.

This was my short browse through the highlights of 2025, and I hand over to Martin for an explanation on the financial results.

Thank you. Welcome as well from my side, everybody here in Kilchberg. Welcome, everybody online as well. As Lechner said, we have more than 100 people online. So definitely looking forward to presenting to you the financial results. So just in a nutshell, so 12.4% organic growth above our guidance of 9% to 11%. So I think good news there. From an EBIT margin perspective, we are also on guidance, actually.

We guided for the lower end of 20 basis points to 40 basis points. So we get to 24 basis points and 16.4%. Free cash flow margin, I think we flagged to you guys that because of the higher inventory levels, we will not be at 10% this year. So we came in at 7.5%, which is actually in line with our expectations. So also good news here. After 11.6% last year, earnings per share we are at [indiscernible] full-time high, CHF 3,164.

I will show you also in one my charts the 5-year development on the earnings per share, so definitely it's been one of the key highlights of today's financial presentation. And then net debt, despite share buyback we are still a healthy level of net debt. Net-debt-to-EBITDA is at 0.84, so you're right, more or less in the middle between our target of 0.5x to 1x.

So I think very strong set of numbers when we look at 2025. Organic sales growth, when we even look further back over the last 5 years, we grew 13%, 11%, 10%, 8% and 12%, which gives an average of about 11%, so definitely very strong performance over the last 5 years and above our mid-term guidance of 6% to 8%. Sales in Swiss francs out of the 5 years, actually in 4 years, our Swiss franc growth was below the organic growth.

So the Swiss franc, as you know, strengthened in the last 5 years. Still, we achieved 8.2% growth in 2025, and we added about CHF 450 million to our top line in 2025. We increased our prices. So it was really price-driven growth last year, 19%. This actually led to a volume mix loss of 6.6%, which is ahead of our plan. When we did our price increase discussions 1 year ago or even 1.5 years ago, we expected more of a volume impact.

I think that's an important takeaway. Internally, we are not surprised by this minus 6.6%. That's the minimum elasticity we actually expected, even expected slightly more. And then from a ForEx perspective, we have minus 4%. Segment information here, we saw the acceleration in Europe from 9.5% to 15.3% in 2025, North America coming in at 8.9%, as [ Adalbert ] has shown by subsidiary as well and Rest of the World growing double-digit in '24 and also in '25 despite the fact that the DIS business, the distributor business, which is a relatively large chunk of the Rest of the World business actually was down by 2%.

We still grew double-digit in Rest of the World, showing that we have a very healthy business in the key markets like Australia, Brazil, Japan, China and South Africa. I think a very interesting story is as well the difference between H1 and H2. Whilst in Europe, H2 came in slightly lower than H1, which is not a surprise and which we flagged in July. That 17.7% growth in Europe is not sustainable. So we still came in at 13.6% in H2, which is, I think, still a very healthy growth, double-digit.

I think the big positive here is the big acceleration in North America, which is actually above our own expectations, right? We did not expect -- we expected a very strong second half in North America. We did not necessarily expect 12%. So that's, I think, a key highlight for today. And then also Rest of the World, we also see -- saw a very nice acceleration in the Distributor business, but across the region there, going from 7.8% to 14.5%.

So if you just look at H2, I think it's actually good to see that we have quite a balanced growth rate of 12% to 14.5% across all the segments. Now moving on to the costs. And when I presented to you the price volume mix, some of you may have thought, okay, why did they actually do 19% price increase? Did they not overdo it?

And the clear answer here is no, because when you look at our material expenses as a percent of sales, we actually lost 270 basis points gross margin -- gross profit margin, right? So in reality we were not able to offset the higher cocoa bean costs through our price increases. We lost 270 basis points on our gross profit margin, which is quite substantial.

And looking maybe at a bit of the cocoa chart, I did not extend this chart back to 1975 or so, but between 1975 and 2023, not a lot happened in the big scheme, right? It was pretty flat between GBP 1,700 per tonne and GBP 1,950 or GBP 2,000 per tonne. And then the whole roller coaster ride started, right? I mean we have seen a massive price increase.

No big news here. But of course, this was a difficult period to manage. And I think it's also important to bear in mind when market goes up as steeply as it did, the chocolate industry does not immediately increase prices, right? You kind of start little by little. It's all a bit delayed because you have typically a cocoa bean inventory, you have futures to cover your future deliveries that you get from your suppliers.

So the chocolate industry didn't actually do price increases for GBP 8,000, for example, right? Because it was all a bit delayed. And then when you had the coverage, you obviously did not buy at GBP 10,000. So it didn't need to do price increases for GBP 10,000 or for GBP 8,000. What does that mean?

It actually means that when the market comes down and the cocoa market comes down, we don't have any -- because lots of -- we get lots of questions, are we now immediately decrease prices? The answer is no because if you are hedged, your cost base, your cost of goods remains stable for some time.

So even if you wanted to, you don't have actually the opportunity to do that as long as you still want to improve your EBIT. I mean the big question here is where do we go from here, right, with regards to the cocoa market. We have seen a oversupply now, slight oversupply. We have a very good production this current season, which started in October. At the same time, the chocolate demand is not so strong, right? It's negative, as you have seen in Nielsen. So we have a surplus of more or less 300,000 tonnes.

So that's the reason why the market dropped substantially. But oftentimes, this type of commodity markets, when they go up, they exaggerate. When they come down, they also exaggerate. So I would personally not be surprised if we did see again an increasing market in the next months. And also in the midterm because some of the structural issues, they are still here, right?

We still have diseases in West Africa, Swollen Shoot disease, which means that the trees are less productive. And we will see what happens with the demand. I think the demand will actually also increase again. We will see a growth in volume, not only at Lindt also in the overall market. So -- and last but not least, we had 3 seasons, 3 cocoa seasons of shortages of deficits, right?

So the global stock levels, they came down quite substantially. So even though we have now 300,000 surplus, it still means we have relatively low inventories of cocoa beans. And let's say that it's not solved, not everything is solved. So that's why actually the chocolate industry in the next few months, I'm not expecting massive price decreases because of the current uncertainty.

And in addition to that, we have now new costs that are coming in, right? We have higher fuel costs, which drive up, of course, logistics costs, which drive up costs for containers across the globe, which drive up in the medium-term packaging material costs, et cetera. Then we have sustainability costs, which are coming in for science-based targets for climate, et cetera, et cetera.

So it's not like -- that's actually nice that we have some relief on cocoa, but we will have other inflations coming around the corner. So don't necessarily expect a price increase in the short-term. Personnel expenses. So as you saw, material expenses are actually up by 270 basis points, but our EBIT margin increased by more than 20 basis points, by 24 basis points.

So we achieved that actually through all the other costs, right? One of them being personnel expenses. In the last 5 years, personnel expenses to sales came down from 21.5% to 19%. So that's an improvement of 250 basis points over 5 years, and it's also an improvement of 50 basis points last year. I mean, of course, our wage increases were not in line with our Swiss franc growth of more than 8%.

We got some efficiencies out of the factories. We have worked heavily on efficiency programs. So it's good to see that we got the benefit here. Operating expenses. A very important category in here is marketing. Actually, I can tell you that the overall marketing spend increased in Absolute in 2025. So this decrease here of CHF 50 million more or less is not coming from marketing. It's coming from all the other areas. So what are all the other areas? It's supply chain costs.

So we have heavily invested in improving our supply chain, especially in North America over the last 5-plus years. So we can really see the benefits of that. We have costs in there like maintenance and repair. Of course, with a slightly lower volume, we have certain benefits there as well. And we also worked a lot with the factories on efficiency programs.

And we have other SG&A costs in there such as sales force costs, et cetera, where we also tried to be more efficient. So we got almost 300 basis points out of here, even though marketing in Absolute went up. So also good news. And then depreciation is more or less in line with 2024 at CHF 300 million. And that means we've got some benefits here, also some operating leverage of 30 basis points from 5.4% to 5.1%.

And over the medium-term, our -- and we said that in the last 5 years, over the medium-term, the depreciation in Absolute will get closer to our CapEx. And our CapEx is currently CHF 330 million. So this will be going up little by little, even though we will, of course, try to manage the percent of sales. So our EBIT came in at CHF 971 million, 16.4% and if you compare that with 2021, we increased it by more than 50%.

So we increased the margin by 90 basis points, 60 basis points, 60 basis points and now 20 basis points. So I think this is a very strong story in a very difficult environment, right, with massive cocoa inflation. It was not easy to manage such a positive bottom line. And we did that, as you have seen, through good cost management, actually not through price increases.

Price increases, of course, helped that we don't even lose more gross profit margin. But without managing the costs extremely carefully and being more efficient, we will not have been able to increase our EBIT margin. A lot of this increase in EBIT margin over the last 5 years is coming actually from North America. I did not show this in this chart here. But in 2021, in North America, we had an EBIT margin of 7.7%.

So we increased the EBIT margin over the last 5 years in North America from 7.7% to 13.7%, 600 basis points. It's something we have been communicating. We have communicated in here in this room and in many also one-to-one meetings that we are planning to improve the EBIT margin in North America by 50 basis points to 100 basis points per year. It's good that you actually see that we delivered.

So we got now to 13.7%. That journey will continue. We will continue to increase the profitability in North America over proportionately also in the next years because we are still below Group average, and we are still way below Europe. In Europe, we were able to continue to successfully increase the EBIT margin as well. In Rest of the World, we have invested heavily. I mean we have invested in supply chain in Brazil.

We have invested in supply chain in China, for example. We have a good setup. Now we have opened new subsidiaries in Chile, in Saudi Arabia, et cetera. So that obviously has all an impact on the EBIT because if you have a new subsidiary, typically in the first couple of years, they do not create a profit, but it's more like a cost center. So it's not something that makes us unhappy the fact that we are lower here.

I think from here now, we should actually see the benefits in the future. And those new subsidiaries and those new setups, they will also generate increasingly net revenue. So we will see an improvement in our EBIT margin in the next years. EBITDA, plus 7.6%. I mentioned the, let's say, the ratio to our net debt. We saw net debt was close to CHF 1.1 billion. Here, we are close to CHF 1.3 billion.

That's why we have this kind of multiple of 0.84. This being one of the background information, very important background why we are launching a new share buyback, right, because we have a very healthy balance sheet actually. And the tax rate has been relatively uneventful, let's say, at least when you look at this chart here, it has been quite a challenge for the team to manage it, especially in '23, we had quite some noise there with one-off benefits, et cetera.

But if you look at just at the high level here and you don't look at the background, we had a relatively stable tax rate of around 21%. We believe this will rather go up in the future, right, because of the Swiss tax is going to be higher in the future. Also some of the higher tax region becoming more profitable like the U.S. So we expect this ratio rather to go slightly up in the future. Net income, not that much to say, also up by around 8% last year. So good news.

Capital expenditure, I mentioned, and we mentioned in the past, we gave you a guidance of around 6% CapEx to sales. And in the last 3 years, we were there or thereabouts, right? We were at 5.8% and now 5.6%. I think that's within expectations. I think also going forward, we'll be more or less at 6%. We are still investing. We are investing in retail. I mean we're opening more stores delivery.

We have opened more than 50 stores, bigger stores. We invest heavily in infrastructure such as new SAP systems. And of course, we are absolutely convinced that we'll grow volume in the future. We are a volume story, right? At the end of the day, we want to be ready for the volume growth that is about to arrive. We are building new wafer lines, big and exciting new innovation that we will roll out globally in 2027.

So we will -- yes, we are investing in our business, as you can see. Free cash flow, I mentioned -- or we mentioned earlier in July that we won't get to the midterm target of 10% average, right? Our guidance, 10% is not valid for each single year. But we're saying on average, we want to get to 10% over medium-term. We have achieved that. On average in the last 5 years, we were at 10.3%.

We had an outflow of CHF 320 million in the inventory because of the higher value of our inventory. If you add that back, we would actually be at CHF 760 million more or less. So it will be way above the CHF 10 million. This inventory value, you can just lose it once in your net working capital. So even if cocoa stayed high or had stayed high, this would not be, again, an outflow out of our net working capital.

So we have rather the opportunity here in the future that we have actually an inflow if the value of the inventory comes down. Therefore, we are positive about our future free cash flow that we will hit the 10% in one or the other year, probably even above -- slightly above. So this is another reason why we are launching a share buyback, right? The strong balance sheet, net-debt-to-EBITDA, future cash flow that we can read well now, which will be double-digit, we believe, being a second reason.

I'll give you some more reasons later. Then earnings per share at CHF 3,164. Again, here, very positive performance comparing the last 5 years, right, plus 54% earnings per share. I think that's good development. I think especially the development from '24 to '25 is very positive that we have been able to manage positive earnings per share development even though our, let's say, the cocoa costs went up, even though our material expenses went up and even though we had to do 19% price increase.

Then the net financial position, we don't need to go into details here. We actually gave back more to the shareholder than we generated a free cash flow. And we also had a CHF 200 million capital increase. So overall, we are still in a very healthy -- in the corridor of 0.5x to 1x leverage. So I think good, good situation to be in.

And here is the third reason why we are launching a share buyback. I mean we have increased further our equity. We almost at 55%. So we are in a very healthy situation from a balance sheet perspective, 54.5% equity. Not only are we launching a new share buyback, we're also increasing the dividend to CHF 1,800. Again, same reasons as I just gave you before for the share buyback.

We are at a payout ratio of close to 58%. And of course, the AGM still has to approve the CHF 1,800. That's what we are going to propose to the AGM. Dividend yield at 1.5% and the market cap is CHF 27 billion as of end of December '25. So we have improved our -- or increased our market cap over the last 4 years. In '21, that was kind of a special situation where the Lindt had a PE of 60.

I think in general the stock markets were really high at the end of '21. So it's probably not a good benchmark there. But it's good to see that overall, we have been able to increase our market cap as well. And I mentioned the share buyback, you have -- I'm sure you have read it. I mean, we are launching a share buyback of CHF 1 billion starting in summer in June. That's the plan.

It will actually be a 3-year period share buyback, so roughly buying back between CHF 300 million and CHF 350 million per year. And it will replace the current share buyback, which is still in place right now, but which most likely will be finished by -- at the latest by the end of May, probably a little bit before. So that was the financials in a nutshell. Quickly going to sustainability as well.

So our 2025 sustainability strategy, we have just concluded it now, right? We had targets for 2025. We have now worked on a new strategy for 2030. I will show you the new strategy as well. But first, looking at the 2025 numbers. So we had a goal to reach 80% of our priority around packaging materials to source them in a sustainable way, and we achieved 93.2%. So we overachieved.

We targeted 100% of cocoa to be sourced through our farming program or through other responsible sourcing programs. We also achieved that. Science-based target, climate is a very important topic, right? And we committed to reducing our footprint, and we have made around 20% progress to do that by 2030. We then also have a 2050 long-term target. Packaging is important, the recyclability of packaging and our goal that we set for '25 was 90%, and we achieved 92.4%.

And then maybe not so much as a target, but more looking at an external organization that has been -- is looking at all the companies, how they are doing in sustainability and EcoVadis is a renowned organization where we won actually Silver Medal, we are top 7%. So we are better than -- we are part of the top 10% Best Companies according to them in our industry, which is also good news.

It shows from a more neutral position that Lindt has made a lot of progress actually over the last years in the area of sustainability. From a cocoa sourcing perspective, which is our most important raw material, we have further strengthened our child protection strategy. We are working together with ICI that's the International Cocoa Initiative. They are a very renowned organization to help companies to improve their child labor remediation or monitoring and remediation system.

We have done that. We have also launched a Living Income program. You may have read in the press that Lindt together with Mondelez, Hershey, Mars and Nestle created the TogetherCocoa initiative. We are jointly going to set up a foundation based in Switzerland. And jointly, we are going to try to close the living income gap, especially focused on Ghana and Ivory Coast.

I think that's an exciting new project or new organization that is going to be founded by the key players in the chocolate industry to really try to tackle the, let's say, the problems that there are in terms of living income gap in Ghana and Ivory Coast. Last but not least, that from 2026, all our cocoa is Rainforest Alliance certified. What does that mean?

It actually means that in the future, when you look at the Lindt product, you will also see the Rainforest Alliance logo on them, not immediately, it will be phased over some time. But I think it's also good to know that we also have the certification now for our cocoa. I promised you to give you a quick snapshot of the 2030 Sustainability Plan. It's indulgence rooted in responsibility.

This new strategy is centered around 3 key areas: source with purpose on the one side, care for the environment, secondly, and then also valuing people. Behind all those 3 areas, we have subcategories and between -- behind the subcategories, we have KPIs, so we can measure it. And we are publishing this, right, also going forward. In the Annual Report, you have also a nonfinancial part where you have the whole sustainability topic covered.

And in the future we will track against this new strategy, right? So you can think about areas like supporting cocoa excellence or reducing emissions so we'll report against how are we doing against, let's say, against our targets for reducing emissions. One of the key areas, we want to champion health and safety because we want to make sure that all Lindt employees, if they work in retail, if they work in the factory that they are in a safe place.

So as you have seen we have made great progress in sustainability. From a financial point of view I think we have seen quite some key highlight. We grew double-digit over the last 5 years in net sales, almost 11%. We had a increase of the EBIT -- overall EBIT over the last 5 years of 51%.

We improved our EBIT, our earnings per share, sorry, by 54% over last 5 years, which is great news. And all of this and also looking at our balance sheet has made us decide to increase or to propose an increased dividend in the AGM to CHF 1,800 and also to launch another share buyback. So I think we are in a very healthy situation. And Adalbert will show you now how we are going to actually trigger more volume growth again. Thank you.

Thank you. I think we could illustrate that we had rather a strong growth story in the last 4 years, not only top line, but especially also bottom line. And I will outline now how we want to continue our growth story, how we want to continue our top line growth and also bottom line growth. So one thing is clear, we had to -- we were forced to increase our prices by more than 40% in these 4 years.

And in 3 out of these 4 years, we did not see any impact on our volumes. So we were flat on volumes, and we could translate the price increase 1:1 in top line growth. Last year, especially in the second half, when we had to implement a total of another 19% price increase was the first time that we also saw in combination with a very weak consumer sentiment and a higher price sensitivity, price elasticity for Lindt products, and we came in with minus 6.6% volume mix.

And it's our clear target to get back to stabilizing volume and to grow volume again as we did in the last years. And what is our -- what are the measures behind? First and utmost, we want to further strengthen our brand. And we will do this with a couple of measures that I will elaborate later. We want to increase the visibility of our brand. We are an impulse brand. So it's most important that people really see us immediately when they enter a grocery store.

They have to see us in shelf space. They have to see us on secondary placement. They also have to find us in prominent locations when it comes to our retail stores. Also here, we made big improvements. And of course, the execution has to be perfect on every touch point as our prices are higher, people are less forgiving and expect a perfect execution in everything.

And the best example are also our retail stores where we did not see any price elasticity even last year because there is an experience and there is an excitement around the products that is second to none and consumers accept also the price increases. The preconditions for getting back to volume growth are our strong -- our brand equity is stronger than ever before.

We focus on the core and key innovations, and you have seen last year that with the Dubai Style Chocolate, we really came out with a spectacular innovation that strengthened us within the young target group. It brought consumers into our stores, consumers to our brand that never have been buying Lindt before. So it really gave us a new momentum and dynamic of the brand.

Visibility, physical and mental availability, I mentioned already. And of course, we want to more aggressively expand into new markets and also expand with our global retail channel, which is one of the biggest contributors to strengthening our brand equity. Everyone who has ever been in a Lindt store sees the brand with different eyes and has a better perception of the brand, and we know that we highly benefit also in the wholesale and in the grocery markets from this positive image transfer.

I mentioned the brand equity is stronger than ever. You know that Kantar BrandZ does a study about the value of brands every year. And for the first time in '25, we were able to get the #1 rank within all chocolate brands. So we were the most valuable chocolate brand in the world with CHF 9.4 billion calculated brand value. And even within the food and beverage brands, we were able to rank within the top 10 brands right behind Nespresso, ahead of Nescafe, ahead of Kinder.

So really something the whole organization is proud of, and we will further, of course, invest into our brand. This is the key prerequisite to further grow with the premium prices that we are charging to consumers. If you see our long-term track record, we can also see that we were achieving a CAGR of around 6.5% between 2005 and 2019, so ahead of COVID. It was mainly driven by volume, 4%, 2%, 2.5% were driven by price increases. And this picture has changed slightly. We were able to accelerate the growth as of '21, I eliminated the COVID year.

So it's not comparable to the chart of Martin because I said I don't want to count the recovery year in '21. But as of '21 to '25, we had a CAGR of 10.1%, stronger driven by pricing with 8%, but still with a positive volume across these years. And as you can also see, with CHF 450 million organic growth in '25. We were able to generate the highest absolute growth that we have ever experienced.

And when we discuss sometimes about acquisitions, there are hardly any premium chocolate companies out there in this size. So we prefer to generate CHF 450 million growth organically, capitalizing our strong brand support, capitalizing our strong brand equity, filling the idle capacity in our own factories, et cetera.

So we think this is much more beneficial for our P&L and also for strengthening our global footprint than going out for acquisitions, which are normally even smaller than this size. Why do we believe that we still have long-term headroom to grow and potential to grow? Because if you compare our market share to the big players in the chocolate market, we are still a relatively small company.

And we know from those markets where we are established long-term, like here in Europe, like here in Switzerland, we enjoy market shares between 10% and 22%. So we have a 22% market share here. We have market shares close to 16% or 19% also in Canada, in Australia, in Austria, in France. So there is no reason why we should not have a 12% market share also globally.

So we believe that we will increase our market share like we did, by the way, in all the last years, also for the years to come. And I will soon explain which trends are in favor of -- for premium brands and especially for Lindt and this should make us confident that the growth story will continue, especially if we look 37% of the total chocolate market, which is around $130 billion, 37% are generated in the so-called Rest of the World.

We generate 13% there, and we have a market share in this Rest of the World of 2%. So only if we bring this 2% to the average market share in Europe and North America, which is around 7%, we could deliver the growth story that we are announcing. But in addition, we also see a huge opportunity to further grow in Europe and in North America, where we have the biggest funds and the strongest muscle also to strengthen the demand for our brands.

We published already in advance a very surprising analysis. This is based on Circana data. So this is a household panel, and it shows its real consumption in the last 52 weeks. And we analyzed the consumption of non-GLP-1 users compared to the consumption of chocolate of the GLP-1 users because we always were very nervous and said, all those people using weight-losing drugs, will they cut back on chocolate consumption. We will lose them in the category.

And the surprising outcome was the GLP-1 users even grew their chocolate consumption stronger than the total chocolate market. And especially when it comes to premium chocolate, and you can see premium chocolate grew stronger than total category with 6.5%. But here, the GLP-1 users grew their chocolate consumption even by 16% or their spendings on chocolate by 16.6%.

So that really came as a surprise to us. What is also surprising, the usage of GLP-1 increased within 1 year from 6% last year to 15% this year. This means 15% of U.S. households have at least one person in the household that uses a GLP-1 drug. So this is really a significant number, and it represents 17.5% of chocolate sales.

The good news is that unlike all hypothesis also from analysts or also our own expectations, these people still long for some indulgence. And when they long for indulgence, they over-proportionately go for premium chocolate, hence for brands like Ghirardelli or Lindt. The total chocolate market globally is sold via different channels.

And you can see here, 43% of the total chocolate market are generated in the classical wholesale trade, grocery, supermarkets, hypermarkets, et cetera. We have a strong position. But of course, we are continuously working to strengthening our position there. That's our bread and butter business. We expect high single-digit growth across the globe in this, let's say, backbone of our business.

Then you still have 7% in confectionery stores in the global market. And this is where we play with our own 600 Lindt stores. And here, we expect also for the years to come strong double-digit growth because we have found now a scalable model, a model that is in line in profitability with our wholesale business. So there is no reason to hold back in the expansion.

This is why you have seen the highest number of store openings last year with 53 stores, and we can imagine even to open more stores in the future as we are entering new markets. So this is a channel that we own more or less also exclusively compared to our competitors. None of them has such a strong direct-to-consumer channel. E-commerce represents 6% of the global chocolate market.

We have an over-proportional share, thanks to our gifting competence there. As you know, chocolate is an impulse category and therefore, less suited to be bought online because online is more a destination. But with our gifting products, we play a significant role also in e-commerce. Convenience is a channel which is especially strong in Asia. We are underrepresented there.

We have developed a program to aggressively conquer this convenience channel. It represents 27% of the total chocolate market, so very significant channel. So here, we also expect a high double-digit growth in the long-term. And then you have the so-called global travel retail business. It's the duty-free business on all the airports. We are market leader in this channel.

And here, we also expect to protect this strong position and grow in line with the market, but it will more be in the single digits. And then there is another channel, 14% of total chocolate market is so-called discounters. It's a mixed basket. We work together with some discounters in Switzerland, for example, you know old Denner also classified as a discounter.

But then you have the hard discounters, which represent the majority of this channel. And we decided not to operate in this environment because we believe it doesn't give us the stage for a premium brand that also helps to strengthen the brand equity, and it would be more a competition which is mainly driven via price, and we want to keep out of this channel.

We are convinced that we benefit more by offering the other channels a premium brand that helps them also to clearly position them as a premium channel, helps them to differentiate from the hard discounters. And therefore, we have a clear strategy on this, by the way, also as the only big chocolate brand in the world, we are not represented in this channel.

Why do we believe that we have tailwind for our growth story? First of all, we see a premiumization of the category for many, many years across the globe. We will benefit from this. At the moment, probably a bit, let's say, dampened by the weak consumer sentiment, a bit dampened by uncertainties, which are in the world. But long-term, this trend is here to stay.

We see that the growing middle class, of course, is striving for better life for better quality products and aging population is also helpful. They are more hedonistic. They are more striving for indulging themselves. We see gifting culture increasing. If you see out there what people spend today on flowers or also on gift boxes in cosmetics, there are also a lot of specialty stores out there.

We see and are convinced that people will also spend more on gifting in chocolate, and we are the #1 gifting brand. Also this will help us. We expected consumer sentiment to improve with the recent developments. We see -- we fear that it might be a setback. I will come to the outlook later. When we analyzed the situation beginning of the year, we were pretty confident mid of January.

End of January, we received the figures from the Christmas market last year, which was, to our surprise, significantly weaker than we had expected, especially volume reacted, especially on higher-priced items. And then a couple of weeks later, we also got the news about the new escalation in Middle East so that we said, okay, if we take all the information together, we better be cautious and we lowered our guidance for this year.

But in the long run, we are sure the consumer sentiment, which is an all-time low, especially in the U.S., but also in Europe, will improve again, and it will also foster our growth story. Product availability always used to be #1 for any big fast-moving consumer goods. Today, it's not a big issue anymore because in online, you can buy everything at any time and you get it ideally delivered within the next half an hour.

So therefore, consumers are looking more for shopping experience when they go out because no one wants to spend his life in front of the laptop and ordering everything online. The people still are looking for an enjoyable time and shopping experience. And this is what we offer in our own stores. And this is why we also see the strong like-for-like growth and this overwhelming acceptance of our stores also in best locations like here, Piccadilly Circus.

And then there is an increasing -- ever-increasing health trend, especially with the younger target group. So people strive for a mindful indulgence. And we have seen like GLP-1, also this is in favor of our premium brands. People go less for quantity and more for quality. And also this makes us believe that the long-term trend is in favor of our brands. And hence, we are confident to deliver our long-term guidance as we have announced it.

This brings me to the outlook. As mentioned, we have lowered the forecast cautiously for this year to 4% to 6% organic sales growth. We confirm the improvement of EBIT especially by the end of the year we will slightly benefit also from the raw material relief and therefore also with the slower growth we will be able to protect the bottom line. And in the long-term we want to get back to 6% to 8% mainly driven by volume growth again.

Also for this year we expect softer volume in the first half because we still have price increases in place mainly on the Easter business. For the second half we expect to get back to volume growth and of course also for the years to come.

And also the EBIT improvement of 20 basis points to 40 basis points Martin elaborated already driven also by strong improvement in the U.S. but you have seen also last year 80 basis points improvement in Europe. So I think -- and of course Rest of the World will also recover. Also here, we are confident.

With this, I would say we open the floor for answers and questions, and I ask Martin to join me here on stage. Please.

I'm Matthew Abraham from Berenberg. First question is just in reference to the revised organic sales guidance that you've provided today. Can you just talk through the price volume shape of the revised guidance and then also the price volume composition of the decline from the prior target that you referenced? And then second question, just in reference to Dubai Style Chocolate. You previously said that it accounted for between 2% to 3% of sales in FY '25. Do you have a target as a percentage of Group sales for FY '26 for Dubai Style Chocolate?

Okay. So for your first question, for first half, we expect double-digit price increase, and we expect a volume mix decline in the ballpark of what we have experienced last year in terms of price elasticity. For the second half, we don't implement further price increases. So we just have a spillover. It will be low-single-digit, and we expect volume growth again.

Altogether for the year, we expect mid-single-digit price increase and a slight negative volume mix. For your second question, yes, Dubai Style Chocolate was in this area that you have mentioned, and we have plans to even grow in this year. Why? First of all, we launched the major part of Dubai Style Chocolate, not January 1, but even in Europe, it took us a couple of months to roll it out.

And especially in North America, Dubai Style Chocolate kicked in only in the second half. So we have, first of all, the full year impact for Dubai Style Chocolate. Secondly, we started with one tablet. In the meantime, we extended the product range to different flavors. Very important was black or dark chocolate, white chocolate, but we have also now different fillings.

And we have different formats. We came with Valentine's Heart. We came with a countline, very successful. The countline was in many markets, the strongest countline out of all countlines or ahead of all mass products. We entered the seasonal business.

So we have Easter offers, we have Christmas offers, and we already extended the range to another city style range with Tokyo style with Matcha, which is also a megatrend not only in social media, but yes, everywhere in any coffee house where you go. So Dubai Style Chocolate is a range that is here to stay. It will grow. We have growth plans also for the years to come. It is certainly not -- it's not a harm for our growth story in this year.

Sorry. And just to clarify, do you have a target as a percentage of sales that you'd like Dubai Style Chocolate to represent in FY '26?

Absolutely, but we don't disclose our product Group sales, neither for Lindt nor for Excellence nor for Dubai Style Chocolate.

Antoine Prevot, Bank of America. So 2 questions for me, please. First, you mentioned a bit of a weaker Christmas than we expected. Does that impact any of the reordering for Easter product? And second question, you mentioned that you would get a bit of cost of material benefit into '26 at the end of the year. Is it in margin term or is it in absolute term?

So the first question, the Christmas business was weaker for the total market. And unfortunately, our performance was in line with total market. And to your second question, does it have an impact on Easter? Absolutely. The retailers analyze the Christmas business and adjust their orders for the Easter business.

This is why we announced a volume mix decline for the first half. Would we -- would, let's say, Christmas had gone more smooth, I would be more confident that probably we can even get back to volume growth in the first half. But it's the key reason why we are cautious also on the Easter offtakes.

Material benefit at the end of the year, I think as we are covered with cocoa beans, as we have mentioned, so the major impact of the decline will be materialized in 2027. But we buy other cocoa products like cocoa butter, where we still have some windfalls. And we can use these windfalls to reinvest in brand support.

We can reinvest also partially in volume-driving promotions, which we will also certainly do as we have learned from the Christmas business last year. And of course, we also have to reinstall the margin that we used to have because in the long-term, we cannot fuel our growth story with a lower margin. So we have the clear target that the margin get back to the level where it has been long-term.

But if you look at, let's say, the long-term and you go back for H1 EBIT, you may remember that EBIT margin actually many, many years ago was even slightly negative in H1. 5 years ago, it was probably about 7%. Then we had some one-offs actually in certain years.

And last year, we got to 11.2% because of what Adalbert just said, it could actually be that, let's say, H1 EBIT margin is going to be more around 10%, so slightly below 25%, which is not concerning because we actually do know that in the second half, we have actually then certain benefits. We're still carrying relatively expensive inventory into 2026. So don't be concerned if our EBIT margin H1 is going to be below 25%. It's actually what we expect.

Samantha Darbyshire from Goldman Sachs. Can I just ask about how you're seeing the consumer at the moment? You made some very valid points around the fact that the industry doesn't have huge capacity near-term to reduce pricing from higher cocoa.

But do you think that the price point of chocolate still allows it to be an affordable luxury for mass market consumers now or is there a risk now that it will be more difficult to return to the historic volume growth that Lindt delivered while chocolate is at this higher price point?

We are absolutely confident that chocolate is still an affordable luxury, a luxury product that is democratized across the population. If you see that an average chocolate bar of Lindt is in the area of CHF 3 to CHF 4 or EUR 3 to EUR 4, and you compare this with a small little espresso or a small cappuccino that you buy in any coffee house or in any restaurant out there, it's not even needed to discuss if this is an affordable product.

Of course, it is. What we have learned in the past time, it's not the first time we do price increases. There is a so-called sticker shock in the beginning. It is in combination also with retail behavior because once you increase prices, there is also a certain period where retailers are not immediately promoting because they also legally have to establish a new price point and only then they can claim that it is now a discount.

And so after the sticker shock, normally, we see that after 6 months, consumers are getting accustomed to the new price points accepted. And then as of then, we have a normal volume growth as we used to have before.

This is different this time, as mentioned, as we see now that currently geopolitical situations plus economical situations, I mean, today, [indiscernible] announced 50,000 layoffs in Germany and so on. So we have a situation where consumers are a bit, I would say, insecure and consumer sentiment is really on a low level. But if this situation will stabilize, I'm sure that chocolate is further on the list of affordable consumer products.

Also when you look at Lindor, for example, you have different pack sizes. So you have different price points as well. There's not like one Lindor size, for example. You can buy Lindor in 100 gram, 200 gram, [ 300 gram, 700 gram ], et cetera, et cetera.

So we are actually hitting different price points. So some consumers may also choose to go to a lower price point. I think that's also important to bear in mind. When you think about volume and recovery, et cetera, it's not one price point.

Here is a hand up.

It's from Bing from Rothschild & Co. Redburn. Can I ask 2 questions about North America, please? You mentioned North America. So North America, you mentioned H2 growth accelerated to almost 12%.

That's probably partly due to the Dubai Style Chocolate launch and also some retailer restocking. If we strip out these effects, what do you see the underlying run rate going to 2026? Then secondly, on Russell Stover specifically, can you give us an update on the strategic review? What's the plan to turn around the brand?

Let me start with the second question. The first, I didn't fully get. So Russell Stover yes, we are all not happy with the development of top line, but Russell Stover was integrated into the North American network in the last years so that we benefited from a better supply chain. We benefited from synergies in distribution.

We benefited from synergies in shared service, in software support, et cetera, et cetera. So I would say, to give us the critical mass and be a significant player on the North American market where we benefit cost-wise and also what Martin has mentioned that we were able to improve the bottom line from 7% now to more than 10% or 13% has to do with the footprint that we have in North America.

And here, Russell Stover plays an important role. So to dismantle this construct is not an option, and it's also not what we pursue. What we have to do is to bring back top line growth to Russell Stover. We are working hard on improving the bottom line.

You know that we are also working on the supply chain setup, et cetera, et cetera. But the clear answer is Russell Stover will be a part of the Lindt portfolio in North America also for the years to come. Do you want to take the first question?

Sure. You asked about the underlying growth in North America. I would actually not look at Dubai Style Chocolate in a vacuum. I mean, if you as a consumer going to a retail store or to a Walmart and you spend $10 or $15 for a Dubai Chocolate, you may actually not spend that money for something else, right, maybe a Lindor or whatever.

So I think you cannot just say, okay, Dubai Style is incremental. And if that incrementality is not there anymore, it's going to fall off. I would not look at it like that. So I would rather look at the overall purchase that the consumer does. And the underlying growth in North America, you have seen that we had a very strong H2, slightly above Europe even or more or less in line, let's say.

And for next year, I'm expecting North America as well to be in the ballpark, right? So I'm not expecting North America to be below Europe. I think we clearly have indications also when you look at Nielsen that actually North American numbers, they have improved over the last month. So we are confident that also North America can grow probably slightly above our guidance.

We had a very strong start. We just got Circana data from North America, and we are gaining share again. Sorry, I just -- we have a written question here from QA Assist from Dennis van Iersel, UBS. How do you feel about promotions going forward to drive volumes versus brand perception? Very good question. I mean we are a premium brand.

We are not a luxury brand. So we are not a Louis Vuitton or an MS to say never on promotion. We are a mass market premium brand, and we always did promotions also in our history. So when we speak about, let's say, enforcing promotions to get back to volume, it has to do with price points that we probably crossed with our price increases to say we do the same promotion with more aggressive and attractive price points where we know that the uplift is significantly higher.

It could mean that we also question the frequency of promotions. Most of the time, the promotions are linked to investments with the retail partners. So if it could be more beneficial to invest into a higher frequency of promotions instead of having the 21st TV copy on air. So we will try to find a balanced approach because we have seen with all KPIs that the brand equity and also the image parameters are at an all-time high.

But partly, our price points have crossed hurdles where the consumers shy away or react with a volume decline. So I think there's no contradiction between brand perception. We will certainly do nothing that harms our brand equity, which is our biggest asset. There's a second question. We have on the phone. So we have a call here. Tom Sykes, could you phrase your question, please?

A few questions just on the retail -- global retail business, please. First of all would be, how much of Dubai Style sits within global retail, please, and the contribution to global retail growth? Because it does look like your volumes, excluding store openings are probably down on a like-for-like basis.

So what is the outlook for volume growth within the retail business specifically, please? And then just your EBITDA margin hasn't improved, but your EBIT margin has done, and it does look like the D&A, particularly on -- well, on both parts, retail and other has come down as a percentage of sales. Where is the EBITDA margin relative -- on global retail relative to the rest of the Group, please? You said it's similar on an EBIT margin, but where is it on an EBITDA margin, please?

So to your first question, what is the share of Dubai Style Chocolate in retail? And was it -- I understand you -- how would the like-for-like growth have been without Dubai Style Chocolate? I would say it's the wrong question. If you take a retail store of 100 square meters and you have an innovation, which is a blockbuster like Dubai Style Chocolate, of course, you dedicate a huge amount of your most prominent place to Dubai Style Chocolate.

And if you would not have Dubai Style Chocolate, would probably be wafer. If you wouldn't have wafer, it would probably be any other innovation. So especially in retail stores, you should not break your brain about cannibalization. It's in our hands what we promote there. And of course, we always try to surprise consumers with innovations, with newness.

Also when I do store checks in our own retail stores, I always ask the store managers, what is the biggest concern of our consumers and everyone across the world tells me consumers come in and ask what's new. So we offer 850 products in these retail stores, and they are concerned what's new. So they are really -- they want to explore something.

They want to discover something that they do not find in their supermarket. And hence, of course, we prominently place innovations more prominent that we will do it in our wholesale stores. So yes, Dubai Style was a strong portfolio or a strong product Group in our retail stores, but it certainly doesn't mean that our retail stores had a volume decline without Dubai Style Chocolate.

The second question -- and by the way, of course, we play now the full range of our Dubai products better in retail than in any other channel because we can permanently display all the flavors, we can permanently display much. We do [indiscernible], we did events with influencers, et cetera. So it brings excitement to the stores, and we will continue to do this.

You asked about the EBITDA margin. Actually, it's very similar to the rest of the business because when you look at the depreciation in the retail division, if you put it in proportion to the rest of the business, it's very similar. What we actually look at is also the return on invested capital, and we exclude certain positions such as our financial asset around the pension fund.

Also, we exclude things like goodwill and how we look at it internally, our ROIC is more or less at 20%. So when we decide to open a new store, we always want to have an IRR of at least 20%. And we are really happy about our retail division nowadays also when you look at all the key financials.

I mean, if you look at direct store profit, if you look at the EBIT margin of the overall business, if you look at the EBITDA margin, if you look at the ROIC, it all is green basically. So it's not a concern from a financial point of view at all.

And also to mention, yes, we had some issues with the retail division historically grown, and we have cleaned it up. So we have closed consequently all stores that did not deliver against the KPIs that we have given out as a requirement.

In 2020, remember, we announced right before COVID, nothing to do with COVID to close 80 stores in North America. We have done that. So we have a very clean portfolio of stores right now.

I mean one follow-up would just be that -- I know you said the D&A looks similar, but if we look at the right-to-use asset depreciation and assume that's part of your retail network, it looks like the D&A is a lot higher compared to the rest of the Group. So I don't quite understand how the EBITDA can be the same and the EBIT can be the same, but maybe we can take that offline.

Happy to show you or talk you through it.

Callum [ Elliott ] at Bernstein. A couple of longer-term questions. Firstly, can you talk a little bit about how the SAP deployment is going and the benefits do you expect to see over the next few years, both from a cost perspective, but also maybe more importantly, from a growth perspective.

And then my second question is, one of your peers has very recently in the past week or 2 launched a so-called chocolate product, which is not derived from cocoa at all. And you obviously spoke about some of the sustainability pressures facing cocoa. I sort of wonder, are these kinds of initiatives, things that you might be interested in as well or are you committed to sticking with cocoa-derived chocolate specifically?

Should I start with SAP or start with this?

No you deserve all the merit for SAP migration because we did it successfully last June.

As you know, SAP is a big word, and it's a difficult project. For those of you, maybe not many of you who have enjoyed being part of an SAP project, you know that it's hard work. It's like a heart transplantation, I always say, especially because also once you have gone live, it's not -- you're not done, right?

It takes actually probably another 12 months to really be back to where you were before. So we are extremely happy where we are. I mean we had a go-live in a very important organization, U.K. At the same time, we also went live in South Africa and Benelux. And we really had no disruption. So that's good news. Of course, you then work through certain things in the beginning, teething problems.

That's normal. So we are very happy where we are today. We are on plan actually, on budget right now. Benefits, we will standardize all the processes, right, which will take time, but we will standardize. Right now, we don't have one SAP in the Lindt Group right now, right? We have different instances. We had different instances.

We have now one kind of, I would say, pretty aligned system in North America, and we are rolling out in Europe and the Rest of the World, Asia-Pacific and other S/4 instance, which will be pretty harmonized. So it's clear that this will bring benefits in the future.

But now in the first stage of the project, we really want to focus on making sure we can land the airplane, right? And once we are stable, once we have processes that are best-in-class, we can then think about streamlining it more.

You can also think about AI, for example. I think SAP is the perfect platform SAP/4HANA to later on put on top of that certain AI agents, et cetera, because we have one database. We have one harmonized master database. So it gives us lots of opportunities in the future. But this is still some time out. Now we are still focused on getting it really up to speed and having a successful implementation.

I think altogether, it will give us more transparency. We will have a common master data, which we never had before. So in terms of product planning, which means efficiency and right forecasting, we should see major benefits. But also, of course, if the cost structure is more competitive, it should also give us free funds to support behind growth.

Your second question, peers have launched chocolate on a non-cocoa base. Look, our brand positioning, our DNA is we are one of the few pure players in chocolate. We stand for highest quality, best taste, super premium and no compromise on quality. So I think before Lindt enters into cocoa substitutes, I think all the others would have launched successfully, hopefully, non-cocoa products.

At the same time, we observe what's going on in the market. We even took an investment, a small investment in a start-up that works on cell-based cocoa, which is different to non-cocoa products because cell-based cocoa delivers at the end the same result just on a different way. It's grown in the laboratory. We can choose the beans. We can even choose the taste flavor.

So we are not yet planning to launch a product, but we are observing what's going on. It has mainly to do with consumer acceptance of cell-based products. We have seen ups and downs with meat substitutes. We have seen ups and downs even with milk substitutes. It was a huge boom, then it [indiscernible] came down again in their market capitalization.

So we are -- let's say, we are a traditional brand that stands for highest quality products and people expect that we use real cocoa. There might be start-ups. There might be competitors who have a different positioning and different approach, and there might be early movers in this direction.

And I would say we observe and we don't exclude that one day, we will also enter into this territory, but at the moment, it's not planned. Any other questions? Otherwise, we thank for the attention. I'm sorry, there's a written question. Okay. So from Mikheil Omanadze from BNP Paribas. First, would you have lowered your guidance if there was no increase in geopolitical tensions?

In other words, to what extent is the guidance cut driven by the weak December data? Let me start with this first question. As mentioned, a guidance is the aggregation of all data points that you have available. And if 5 out of the 6 data points would have all shown in the direction 6 to 8, probably we would have ignored the geopolitical tensions.

If 3 out of 6 are already in this direction and the other 3 are in the other direction, you are discussing what should we do. And I would say the geopolitical tensions were really the tipping point that moved the needle and where we said now it's better to be cautious because we were expecting really consumer sentiment picking up and getting more traction and being more positive, which has a global impact on our business.

In addition, we are directly affected when tourism comes down. And you can imagine that the hub in Middle East is the hub for more or less 80% or 90% of the flights from Asia. We benefit from Asian tourists in all our retail stores in the metropoles in Europe. We benefit in global travel retail from passenger numbers at the airports. So we have several impacts.

The least impact is the sales in Middle East, it's tiny for us. But the other impacts that we expect, even if the war would end tomorrow, like Trump announced, it will take months that consumers have confidence again to fly or to book a flight via Doha or Dubai. And this impact can make the difference in the growth rate for us.

If this is enough as an answer. Second, would you say there is an element of conservatism to your guidance? If you see the performance of the last 4 years, you hopefully understood that there is always an element of conservatism in our guidance. We prefer to overdeliver and underpromise and not the other way around.

Three, while it is clearly early to talk about full year '27, how may the shape of price volume and margin look like if cocoa stays where it is now? I think that's too early to answer. It's clear that the mix should be completely different. It should be mainly volume-driven growth and most likely price will not contribute at all to growth. So it could even be that we have to trust on a reverse price elasticity.

And so we will come back to this in 1 year time, I would say. So there are more? Are you so kindly tell us what was the volume growth in dark chocolate in 2025? So the answer is that we had a volume growth and all the price increases came on top. To be honest, I do not even know because we have dark chocolate across all categories. So I could not even -- I don't have this.

This grew clearly above average.

It grew. Like we -- total, we had a negative volume development. We had a positive volume development on dark chocolate. Did you start the year in the organic sales bracket 4% to 6% year-on-year in January, February?

No, we started significantly above, but this is misleading because Easter is earlier, and we have a mixed basket of Easter and regular sales. So we have to separate this. So it's misleading. What else we have more questions on the phone. Edward Hockin, please, can you give us your question?

It's Ed Hockin from JPMorgan. I hope you can hear me okay on the line. I've got 2 questions, please. One is on pricing. So what I seem to read is not much in the way of price concession for this year, but can you remind us to what cocoa price level you have priced up to?

And I suppose with cocoa prices now at GBP 2,500, whether that pressure for price concessions may build as we think about 2027? And also on pricing, how closely do you manage your price gaps looking at your price points versus competition? And then my second question, please, if I may, on margins.

Although not specific on 2027, I guess, philosophically, if you had a year with significant cost tailwind, then should we expect still 20 basis points to 40 basis points of EBIT margin or would it be reasonable to assume you could have a higher EBIT margin delivery in such a year?

Let me start with the second question. I think we are in a situation where we have explained that we sacrificed on margin in the last 4 years, not to overdo it with price increases. So we lost 270 basis points in margin.

We also probably were not able to increase our marketing spendings in a way that we would have wished because also this was, let's say, a balanced approach, not to say we go in full power and have to increase prices more than we should have or we are forced to. So the answer is if we have cost tailwind, we have, again, to find a balanced way to, first of all, cover part of the margin loss that we had, ramp up our marketing expenses.

And then -- and only then we think about EBIT margin improvements. I think you have seen in the past time that we do not pull the hand brake when we improve at 40 basis points. We had 60 basis points in the last 2 years and 90 basis points even the year before.

So of course, if we are in the position to go higher, but it's not the first priority. The first priority is to get back to volume growth. The first priority is to secure top line growth because in the long-term, this is more beneficial for all stakeholders in the organization.

I think with regards to pricing, it's a good question. I think you really have to look at the overall universe in the chocolate industry. You have private label on the one side. Private label typically is hedged much less than the other branded players, right? Private label is probably hedged 3 to 6 months.

So private label moves much faster if the price -- cocoa price goes up, private label also corrects quicker. And that's why there is some noise right now in the chocolate industry because, of course, private label increased fast. Maybe that was not so much of a news, but actually now that they brought down in certain markets, the price, of course, this creates noise.

The branded players typically are much slower because their coverage tends to be much longer. We have, for example, beans inventory. All of our competitors say they also have futures. And therefore, I would say, overall, the industry has probably increased prices by something between GBP 4,000 and GBP 5,000.

The market was at GBP 10,000, so not even close to where the market was. I know everybody gets now excited about the cocoa price decrease, but let's not forget that the fundamentals, the long-term fundamentals, they're still the same. We have -- we will have stronger volume growth in the future, not only Lindt, chocolate market in general.

At some point in time, the crops will not be as good as the current crop again because every 5, 6 years, you have El Nino. At some point in time, there will be -- again, the big news are El Nino and everybody gets nervous again. Cocoa market may go up again. We still have the diseases in the cocoa trees, Swollen Shoot.

That may also happen again. So therefore, right now, we should not talk about price increases, right? Of course, if needed and if possible and if needed to grow volume, one may adjust a bit [indiscernible], promotions, et cetera, but it's far too early to think about the price.

I would add, we also don't exclude price decreases. Of course, not. But to -- neither will we pass on all the tailwind in price decreases nor will we pass on everything in EBIT improvement. I think that's the message. If there are no further questions?

There's one more apparently.

No, no more questions. It looks like more questions, but we have just to skip them. No, thank you very much for your attention. Please grab your chocolate box at the exit. And yes, Happy Easter soon with hopefully some Golden Bunnies in your Easter basket. Thank you.

Thank you very much.

Ladies and gentlemen, it is our pleasure to welcome you to the Lindt & Sprüngli Half Year Results Conference Call and Webcast. My name is Martin Hug, Group CFO; and with me today is our group CEO, Adalbert Lechner. The presentation and transcript of our prepared comments will be uploaded to our website this morning. The presentation will take approximately 15 minutes. Following the presentation, we'll hand over to the operator who will then manage the question-and-answer session.

The agenda points of the presentation can be seen on this chart and include some of this year's highlights to date, a detailed review of the first half, our expectations for the full year and the medium to long term and a chance for you to ask questions.

For this call, we do not have any major update on sustainability. I would also like to refer you to the disclaimer at the end of the slide deck. To kick us off, I hand over to our group CEO, Adalbert Lechner, who will take you through some key trends and highlights we saw in the first half of 2025.

Good morning, ladies and gentlemen. Welcome, everyone, also from my side to the Lindt & Sprüngli Half Year Results Conference Call and Webcast. Let me start by saying that I'm proud of what our teams achieved in the first half of the year. We have shown resilience in a challenging market environment, which demonstrated the loyalty of our consumers.

Let's dive into what we dealt with. The development of the global chocolate market in the first half of 2025 was a continuation of what we saw in 2024. With cocoa prices remaining close to record highs, the market was impacted by price increases, and we saw a reduction in volume with an increase in value globally. In this situation, both ends of the market profited, private label on the one side and premium products on the other. Private label products gained market shares with price-sensitive consumers. Lindt's premium positioning and strong presence in seasonal and gifting items also enabled us to defend and grow market share. Martin will get into more detail about the cocoa price later on.

As it stands today, from what we see, the new season's crop is looking better and the experts are forecasting a surplus. We are also seeing demand reduction due to the mentioned volume declines, which puts further pressure on the cocoa market. That being said, plant diseases continue to affect cocoa farms in West Africa and the overall situation remains volatile.

Looking at global consumer trends, we see that mindful indulgence continues to gain traction as a trend we are uniquely positioned to capture with core products like Lindor, which is designed as a small and high-quality treat.

Also, our dark EXCELLENCE chocolate tablets cater to this consumer need. This trend goes hand-in-hand with an ongoing shift towards premiumization, especially when it comes to gifts for loved ones and consumers also like to treat themselves to an exclusive product like our Dubai style chocolate.

What started as a social media hype, resulted in one of the most spectacular product launches by Lindt with fans waiting in line to purchase a limited-edition hand-made bar of Lindt's Dubai Chocolate. This is now a standard product that we can make available at scale through our wholesale partners. Starting in December last year, we rolled out our Lindt's Dubai Style Chocolate in all our key markets in Europe and beyond. And in the second half of this year, we will also offer Dubai Style Chocolate products in the U.S., both through our Lindt brand as well as Ghirardelli and Russell Stover. With Dubai Style Chocolate, we managed to reach new and younger consumer groups, which drives brand awareness and will fuel our future growth across our product range.

In March, we opened our first U.K. Lindt flagship store at Piccadilly Circus in London with Lindt brand ambassador, Roger Federer, cutting the ribbon. It's a perfect demonstration of our successful retail model. At Piccadilly, in the very heart of London, we secured a prime location with 80 million people passing by our shop windows below the iconic curved Piccadilly Lights every year.

In this flagship store, local shoppers and tourists alike can truly experience the Lindt brand and watch our Lindt Master Chocolatiers in action. With similar successful openings and a strong performance in our existing stores, our global retail division experienced strong growth of 22.1% in the first half of this year, supported by lower price elasticity.

By the end of June, the store network has reached 590 stores worldwide, 60 stores more than 1 year ago, and we have more exciting plans in the pipeline.

With that, I come to one of our most recent highlights. As you may have heard, Lindt was named the world's most valuable chocolate brand in the 2025 Kantar BrandZ ranking for the first time. Kantar is one of the world's leading marketing data and analytics businesses.

Among 21,000 brands that were evaluated across 532 categories and 54 markets, Lindt also ranked eighth in the global food and beverages category. This achievement is based on our strong and enhanced brand equity driven by continuous brand support, clear premium positioning and a consistent focus on quality, all of which resonate with consumers and drive long-term growth.

Despite the difficult global operating environment with declining volumes in the global chocolate market, sharply rising costs for cocoa and the need to again implement price increases, Lindt & Sprüngli was able to continue its successful sales growth trajectory, surpassing our top line guidance at half year and delivering in line with our guidance on profit. In addition to implementing price increases, we have continued to implement projects in all regions that drive efficiencies and cost savings.

Price increases, coupled with those cost savings projects, are the key drivers for the positive operating profit development that we expect for the full year. Overall, we are pleased with our progress and remain optimistic about our future prospects.

Before I begin, those of you who are new to Lindt & Sprüngli should consider the seasonal and gift-oriented nature of our premium chocolate business. This seasonality means that our sales are skewed towards the second half of the year with approximately 60% of sales in half year 2. However, it is important to remember that the first half of the year absorbs close to half of our annual fixed costs. As a result, sales, profitability and free cash flow are always lower in the first half than the second.

That said, the Lindt & Sprüngli Group has made a solid start to the year. Organic sales in the first 6 months achieved a growth rate of 11.2%, which is above our guidance provided in March 2025 of 7% to 9%. EBIT came in at CHF 259 million, delivering a first half EBIT margin of 11.0%, which is in line with our half year 1 EBIT margin guidance of between 10% to 12%. This margin was impacted by higher cocoa material costs, partially offset through efficiency gains in personnel costs, operating costs and price increases to our consumers.

Net income was CHF 189 million with a net income margin of 8.0%. Free cash flow came in negatively with minus CHF 80 million in the first 6 months, a decrease over the first half of 2024. The key reason for this decrease was the increased value of the inventory as of end of June. Higher cocoa bean prices led to this increase in the raw material and finished goods inventory values. This is a one-time effect. I will go into more detail on this later in the presentation.

Our net debt position increased from CHF 880 million at the end of 2024 to CHF 1.4 billion. This balance is slightly higher than a year ago when net debt was at CHF 1.3 billion. One driver of this net debt increase alongside our lower free cash flow was our share buyback program, which is well advanced and which we will finish at the latest by mid next year.

Excluding the lease liability, which is included in the overall number, our net debt position is approximately CHF 1 billion compared to our EBITDA, which is again expected to come in above CHF 1 billion in 2025. We still have a very strong balance sheet with an equity ratio of 55% compared to 52.8% at the end of 2024.

Total sales reached CHF 2.35 billion in half year 1 with growth in Swiss francs of plus 9%. First half sales grew by solid 11.2% organically. Cumulatively, we have grown more than 60% over the last 5 years in the first half, a CAGR of 11.5%. Europe, in particular, posted an excellent result with 17.7% organic growth.

With strong price inflation, sales volumes in the global chocolate market have declined by around minus 5%. Despite these market conditions, our brands show strength and resilience, growing value and volume market share in most key markets. Low price elasticity, especially in Europe, led to a volume/mix decline of minus 4.6%, which is better than we had originally anticipated.

Price increases of 15.8% were in line with the double-digit increase we communicated in March. Due to significantly higher input costs for cocoa, double-digit pricing actions were required to be taken in all markets over the last 6 months. Please bear in mind that not all price increases in all subsidiaries were implemented on January 1. So in the second half, we will see an even higher effect of the implemented price increases.

Volume mix was negative, slightly better than we expected with a decline of minus 4.6%. However, the price elasticity varied region by region. In Europe, we experienced a low price elasticity in the first half across all markets. On the other hand, in North America, a weak consumer sentiment led to a volume decline in the category and to a lesser extent, also in our business.

Reported sales in Swiss francs rose by 9%. The currency effect had a negative impact of minus 2%, in particular due to the weakening of the U.S. dollar and the euro, while the discontinuation of a distribution agreement with the confectionery brand in Canada at the end of 2024 had an impact of minus 0.2%.

I now hand over to Martin, who will take you through the results in further detail.

Thanks, Adalbert. I will now start with the regional sales analysis. On the following slide, I would like to give you an overview of the sales performance by segment. In the first half of '25, the Europe segment, where we generate almost half of the group's sales, saw an increase in organic sales by an outstanding 17.7%. All European Lindt & Sprüngli subsidiaries achieved double-digit growth with the strongest development of more than 20% plus in Nordics, Benelux, Central Eastern Europe, France and Austria. The European region benefited from lower price elasticity and higher brand loyalty from consumers.

The North America segment showed organic sales growth of plus 3.6%, behind expectations due to the weak consumer sentiment. All subsidiaries in North America continued to grow with the exception of Russell Stover, which faced a higher price elasticity than the other North American companies.

Despite the challenging market environment in the U.S., Lindt & Sprüngli grew overall significantly market share. The North American segment is expected to accelerate growth in the second half of the year compared to the 3.6% in the first half, driven by strong activation plans, promising seasonal sales and innovations.

In the Rest of the World segment, we grew by 7.8%. Notably, the subsidiaries in Japan, Brazil, South Africa and China achieved double-digit growth rates. Japan and Brazil, both countries with strong Lindt store networks benefited from lower price elasticities in retail stores. There are many large traditional chocolate markets within the Rest of the World where we see significant premiumization potential for Lindt. As a result, we are convinced that we can maintain double-digit growth in 2025 and over the midterm.

Let's move on now to the important topic of costs, category by category. Material costs, which have been adjusted for changes to inventories came in at 33.3% of sales, 170 basis points higher than in 2024 and 330 basis points higher than in 2023. Although the higher cost of cocoa was partially offset through long-term contracts and efficiency gains, a major part of the cost was reflected in price increases and other revenue growth management measures.

Strict cost management allows us to mitigate the impact of rising cocoa prices to a certain extent and double-digit price increases of 15.8% were needed to protect the bottom line. Looking forward, we estimate that our total material costs will be slightly higher in 2025 compared to 2024, driven by cocoa. Despite the recent declines in cocoa prices, we still expect cost inflation to continue into 2026 as the lower cocoa prices have an impact on the P&L with a significant delay. At this point in time, it is difficult to give a precise forecast on the cost of goods development in 2026 due to the market volatility and uncertainty.

Let's take a quick dive into our most important commodity, cocoa. After seeing a strong rally in the cocoa market in 2024, the market has begun to decline over the first 6 months of 2025. In January, we reached a level of about GBP 8,000 per metric ton for the month relevant to us in 2026. In the meanwhile, the market has dropped to about GBP 5,000 for the March 2026 futures. We believe the main reason for decline is the weakening demand, especially in North America.

In addition, based on the expert information we receive, the crop outlook for the coming season is expected to be better than in the last few harvests. However, bear in mind that the market is still more than double of what it was a few years ago. Our experts continue to monitor the market very closely to place ourselves in the best position possible, and we are doing our utmost to put in place the right strategies to provide future flexibility. Many market players expect a potential market correction once there is better visibility on the future crop sizes in Côte d'Ivoire, Ghana and Ecuador.

We continue to see a lot of new plantations, especially in Latin America, which gives us confidence in the long term. Of course, it is quite difficult to predict where the cocoa futures market will go from here. It is encouraging to see in the last days that we saw a decline of more than 10% over the last week. The speed of the extent of further market corrections will also depend a lot on the development of the overall volume demand in the chocolate market.

We expect a volume decline in the global chocolate market also in the second half of 2025 due to the pricing action in the overall industry. Personnel expenses as a percentage of sales decreased by 60 basis points compared to the same period in 2024. Also, compared to 2021, 2022 and 2023, we can see economies of scale. The increase in absolute terms in the first half of 2025 is mainly driven by wage inflation and our successful expansion in the global retail business, opening new stores in very promising locations such as Piccadilly Circus in London.

Operating expenses as a percentage of sales decreased by 50 basis points. This is mainly driven by a continuing leverage in supply chain costs and SG&A. Secondly, in line with our high-growth strategy, we continued to increase advertising investments in our brands across all geographies.

At CHF 259 million and 11% of sales, EBIT decreased as expected by 250 basis points compared to the first half of 2024. Bear in mind that we recorded a positive onetime impact on our other income as a result of a resource legal dispute in North America in 2024. In 2023, we also had a positive onetime impact from the revaluation of the inventories in January 2023 and implementing price increases early in 2023.

When looking back beyond 2023, we can see that compared to 2021 and 2022, we actually increased EBIT margin by 170 basis points and 330 basis points, respectively. Similar to 2025, we had no onetime impact in 2021 and 2022. Hence, those years are the better benchmark than the last 2 years. EBIT margin in the second half will need to be around 20% compared to roughly 18% in the last years. The key driver for the increase in EBIT margin in the second half is the full year impact of the price increases and the continuation of benefits in our operating expenses.

In North America, we continue to make solid progress on the various projects aimed at further leveraging the Russell Stover business and on our overall streamlining for growth initiatives. These areas include production, merchandising, logistics, procurement and IT. Bottom line benefits have already started to materialize over the last years. We expect more benefits to come from these projects in the coming years.

Having said that, due to the weaker consumer sentiment in North America, we do not anticipate that we will improve our EBIT margin by 50 to 100 basis points in 2025 as we have done for a number of years. This is also because we benefited from a substantial positive one-off impact in 2024.

Net income reached CHF 189 million or 8% of net sales. In the first half of 2025, the tax rate is at 22.2% compared to 24% last year, in line with our midterm guidance of 22% to 24%. I would like to take you through the bridge of the main cash relevant developments of the first half. In the period under review, free cash flow is negative at CHF 80 million. Capital expenditure came in at CHF 170 million in the first half, CHF 9 million lower than last year. This is in line with our revised plans, which postponed certain growth-related investments from the last few years. We continued the share buyback, which started in '24 as planned. And together with regular dividend payments, we returned more than CHF 600 million to our shareholders.

At the end of the first half, net debt reached CHF 1.4 billion. When assessing our net debt, please also bear in mind that the ongoing impact of IFRS 16 on our lease liability with a negative impact of around CHF 430 million. On a pure cash basis, net debt would be at around CHF 1 billion and our full year EBITDA is planned at about CHF 1.3 billion. Overall, we still plan for net debt, including lease liability EBITDA ratio of 0.5 to 1 in the midterm.

After this update, I'm now handing over back to Adalbert, who will take you through the financial outlook for '25 and beyond.

Thank you, Martin. As I've already mentioned, we had a solid start to 2025 with excellent growth in Europe. We achieved growth in North America, gaining significant market share in this important region. In the second half, we are expecting accelerated growth in North America and in the Rest of the World segment. At the same time, we expect growth in Europe to continue to be strong, however, slightly lower than in the first half.

As already mentioned, due to the fact that price increases were implemented at various points in the first half in all regions, the overall price increase impact will be larger in the second half than the first. Based on continued consumer loyalty and the ongoing trend towards premiumization and the impact of double-digit price increases, Lindt & Sprüngli raises its organic sales growth guidance for the financial year 2025 to 9% to 11% versus previously 7% to 9%. And we confirm an EBIT margin increase at the lower end of 20 to 40 basis points.

In the medium to long term of 2026 and beyond, the group remains confident in achieving its goal of an organic sales growth between 6% and 8%. We expect to deliver an average annual increase in EBIT margin of 20 to 40 basis points. Annual CapEx should remain in the region of 6% of sales. Tax rate is expected at about 22% to 24% in the medium term. With this, I hand back to you, Martin.

Thank you for listening to our presentation. And I will now hand over to the operator, who will manage the question-and-answer session. [Operator Instructions] Please note that written questions asked via the web will be answered by e-mail after the webcast.

[Operator Instructions] The first question comes from Jörn Iffert from UBS.

Maybe we can take another question and come back to Jörn right after. We have a question from Andreas von Arx from Baader-Helvea.

I hope you can hear me?

Yes.

First question would be on your free cash flow statement as per -- as the way you calculate it. Could you please discuss a bit this difference in variation margin of commodity futures? I'm just trying to understand a bit where that could be end of the year. Obviously, there might be a seasonality impact, there might be a cocoa price impact, and there has been a CHF 0.5 billion shift compared to the free cash flow of second half last year and the first half this year. That would be my first question.

And then the second question would be on the U.S. and the volume development. Is it right to assume that the pricing in North America would be similar to what we've seen on group level? So that would mean potentially quite significantly negative volumes for you in the U.S. Could you maybe elaborate a bit on that? And did I understand you correctly? Or would you say that also on volume comparison, you have gained market share in North America in the first half? These are my 2 questions.

Let me start with the second question concerning the U.S. development. Your first question was, is the pricing similar to the rest of the group? The answer is, no. We have pretty different price increases region by region, depending on the portfolio mix, but also depending on the sourcing strategy. So in fact, the pricing was slightly lower in the U.S. and also implemented a bit later than in Europe.

The most significant fact that we have to mention in North America, if we compare our net sales to retailers with the offtakes from retailers to consumers that we track in Nielsen, and I think you will also have the data available, we see a huge discrepancy. So the offtake development is twice as strong as the sell-in development, and that's a reflection of the behavior of the retailers.

When you come with significant price increases with a premium brand with relatively low market share like we did in the U.S., the retail partners are a bit nervous if these price increases are accepted by consumers, reduce their orders. And now as we have proven that the consumer pool is healthy and the offtakes are very healthy. And to your second question also, we gained market share, not only in value, but also in volume. This is why we expect significantly stronger orders for the second half. Partly we have them already in our order books.

At the same time, we also see that the weak and soft U.S. American chocolate market accelerated already in the last period comparing to a low base of prior year. So we are optimistic for the second half in the U.S. and we will see also for the full year significantly higher sell-in figures and not only sell-out figures and also are confident that we continue to gain market share, volume and value.

I will try to answer the second question as simply as possible. If there are a couple of effects in the inventory and in the -- with regards to the futures. So first and foremost, we have excluded the impact of the variation margin in the annual calls last year and also now in the free cash flow calculation. You can find that actually in the alternative performance measures, how we have defined it just to take some noise out.

The situation at the end of last year was the following: we had a positive impact of CHF 230 million more or less. And now as per end of June, we have a negative impact of CHF 9 million, minus CHF 9 million. We are futures long. So if the market goes up, you have a positive impact from variation margin. If the market goes down, you have a negative impact. Because I don't know where the market will go. Obviously, it's very difficult to give you a forecast for the full year variation margin. But in the free cash flow definition, you have taken it out to -- because otherwise, it becomes very unpredictable. Then there's a second impact. Now that's purely on the free cash flow, right, excluding the variation margin.

Our inventories compared to the end of the year went up by CHF 500 million, whilst actually last year, same period, it went up CHF 200 million. So the difference of CHF 300 million is a negative impact on the free cash flow. Why did it go up by CHF 500 million? Because cocoa overall that we bought and we got delivered between January, February and March, has a higher value than it had 1 year ago. And then finished goods inventory. I mean if you can see that with the price increase of almost 16%, you can assume that cost of goods inventory value also went up double digits. So that has had also a negative impact. So it's really driven by -- mainly by finished goods, but then also by cocoa, which went up even more than the finished goods.

Okay. I assume silence means it's clear. So let's go to the next question.

The next question comes from David Roux from Morgan Stanley.

Just a follow-on question, Martin, from your comments around inventory. I mean, given that you -- where prices are today, should we expect further inventory build in the second half from the first half?

And then my second question is just on Choco Wafer. Could you perhaps just give us an update there? Can you maybe talk about the early traction with this product and which markets you're currently in and where you plan to roll out and maybe the timing around that?

I'll take the first question and Adalbert will take the second one. Inventory build, we are not expecting further inventory build or further build or further negative impact in the second half, actually. So we believe this is kind of a one-off now in the first half. So I'm not expecting any massively negative impact in the second half from this.

The second question I will take. Chocolate wafer is currently launched and distributed only in 3 pilot markets. It's the U.K., it's Italy and it's Greater Europe. The success is very convincing. So we see continuous growth in these markets. However, we have limited capacity. This is why we decided to invest and in-source the production, but this will take time. We are currently in the phase of building a shell and ordering machinery for wafer production in-house, but this will be up and running only by beginning of '27 and end of '26. And as of then, we can roll out chocolate wafer to other markets who are all very interested.

The next question comes from Jörn Iffert from UBS.

I tried again. Can you hear me now?

Yes, perfectly.

I'm sorry for that. I'm not sure what was going wrong. So one of my most important question in North America was answered, but to follow up with incremental price increases for the second half versus the first half, is it fair to assume incremental price increases second half versus first half around low to mid-single digits? This would be the first question, please.

Absolutely. So it's mainly the full year impact of the price increases that were implemented in a staggered way. So you can imagine you have some discussions with retail partners, the cadence of possible windows for price increases are also varying from customer to customer, from country to country. So only this effect will lead to a higher price increase in second half that we show. It does not necessarily mean that we go out with a second round of price increases, but it's this full year impact. And to be precise, yes, the impact should be low single digit.

All right. And the second question would be, please, on Russell Stover. I know it's not so super important anymore in the group's portfolio. But is there any incremental strategy update, how you want to turn around this brand? Or is it maybe also under strategic review?

As you can imagine, it is constantly under review strategically and also tactically. But to give you also a clear picture, if we see the sellout data in the Nielsen data in North America, Russell Stover is flattish, a slight decline. So the performance is not as negative as it seems to be. We are working on portfolio optimization. We are working on supply chain optimization. We cannot publish now everything, but be assured that we have a clear plan to improve profitability to sharpen the brand profile and also to get to a clear growth track back for Russell Stover.

The next question comes from Antoine Prevot from Bank of America.

So 2 for me, please. First one, maybe on inventory revaluation pricing was quite high in H1, thanks to the pricing. But when I look at volume performance, I mean, tablets and [Choco Wafer] very strong, but gifting a bit slower. So is there a risk maybe with high negative revaluation on the pricing for H2 because of discounting or things like that?

And second question, maybe around OpEx. So you said the OpEx increase was mainly around the store number increase and openings and also [A&P]. Is it kind of like more structural or more some one-offs due to the store opening? And how do you think about OpEx going forward?

I will take the first question. I'm not sure if I got it right. So you refer to the [Nielsen] figures, I assume, where we see very strong volume growth and value growth for tablets. And you see a slightly slower growth on gifting. That's true. So we see that the categories, let's say, in general, with lower ex-pocket prices are more dynamic at the moment. But on the other side, when it comes to gifting, we have a relatively clear picture because we have preorders, especially for the seasonal business in our books. And so therefore, we look optimistic to the second half.

We have very strong orders for Christmas, but also even for Valentine's Day in the books. We don't see a reason for a slowdown. Of course, one thing is clear, if price increases are even stronger, let's say, the impacts on volume can be slightly higher. But overall, as we have seen, we have increased the guidance for the [sales] performance from 9% to 11%. So we expect a continued strong growth in the second half also.

And with regards to your cost, I mean, before I start talking of the cost, just maybe one comment about the profit because I read on some sell-side analyst reports that we missed our EBIT margin. I just want to reiterate that this is actually not correct for those who have written it. We actually gave a clear guidance that we will be between 10% and 12% in the first half, and we came in at 11%. So we are right in the middle of the band that we expected. So no surprises for us.

And for the full year, we are guiding for 20 to 40 basis points. So we sit now at the lower end. So that's been 16.4% versus a base in 2024 that included actually a one-off, right? So the starting base without the one-off is much lower than the 16.2%. But I just want to make a comment on the EBIT miss comment that some of you made, which I don't completely agree because we are right in the middle of the band.

Now with regards to the personnel expenses and the operating expenses, we are actually expecting further leverage on both expense categories, also in the future. In absolute terms, it goes up. Personnel expenses goes up, and that is what I commented and I assume what Antoine, you were referring to. In our retail stores, we have a much higher gross margin because we do not have the retailer margin between us and the consumer.

On the other side, we have higher personnel expenses because it's a store that we have to manage and that to give good service, obviously needs people, well trained people. So that is one of the drivers of the higher personnel expenses. But overall, our -- we had operating leverage in personnel expenses and also in operating expenses. In operating expenses, we had higher investments in advertising and other activities that we call consumer promotion. And on the other side, we had a lower cost. So we had real efficiencies in logistics, for example, or in SG&A.

So overall, from a P&L perspective, with such a high price increase, we have quite a lot of operating leverage in the P&L. So purely from a P&L perspective, I'm actually not that nervous to achieve the 20 to 40 basis points overall, knowing that we have quite substantial price increases in our books. So I think overall, it looks good.

The next question comes from Tom Sykes from Deutsche Bank.

Just wanted to follow up and just get some clarification on the comments on North America that you were saying. Sorry, were you intimating there that your volumes were going to accelerate into the second half of the year?

And just maybe whether it's U.S. or Europe, where do you think retailer stock levels are? And is there that much that retail can actually do in chocolate inventories anyway? If they are low, where would you put them? And are you getting signs that retailers, therefore, do want to increase a little the level of finished product inventory that they're carrying, please?

Thank you for this question, Tom. Well, as mentioned, first of all, we see that the offtakes, consumer offtakes are significantly higher in North America for all 3 brands than what we see as the sell-in. So this has at one point in time to lead to higher reorders and replenishment of our retailers. To give you an example, Ghirardelli shows a strong double-digit growth in offtakes. Lindt is close to double-digit growth. And as mentioned, Russell Stover is flattish. We don't see this in our sell-in figures. And we -- at the same time, we also see the preorders and activation plan. So we are very confident that the inventory level will go up and also the orders from retailers will be strong in second half.

At the same time, there is also one specific issue that differentiates Europe and North America. While we have rolled out the launch of Dubai Style Chocolate in Europe in first half, we had regulatory issues in the U.S. that we had to solve so that we are only able to roll out the Dubai Style Chocolate in second half. And we saw -- we got first results from Lindt Dubai Style Chocolate at Walmart, which are more than exciting. But we also launched under Russell Stover, Dubai Style Pralines, and we will launch under Ghirardelli Dubai Style Pralines. So I think this also makes us confident that we will see a clear acceleration in the North American market in second half.

The next question comes from Warren Ackerman from Barclays.

It's Warren here at Barclays. I just wanted to dive into Rest of World region in the first half. It was, I think, 8% organic sales growth. And you talked about double-digit growth in 4 geographies. Can you maybe sort of outline what is dragging it down? I imagine it's Australia, but can you maybe sort of identify what's happening in some of the more developed markets within Rest of World? And you said that your confidence is for double-digit growth in the second half. Is that because you expect some of these mature markets to improve? Or are you expecting some of the kind of growth engines to accelerate? I mean have you had any delistings in some of the mature markets like Australia from the pricing actions that you've taken? I just want to get a bit more confidence about that Rest of World number, which was a bit below consensus in H1.

Yes. Thank you, Warren. In fact, the Rest of the World figures are also below our expectations. To be honest, it was not Australia. Australia showed a good performance, nearly double-digit growth, and that's the projection also to continue for the remainder of the year. We had one area that really dragged us down. This was our international distributor business. What we realized what I mentioned before, and again, as mentioned, we had different price increases per region. And in the distributor business, we had significantly higher price increases than the group price increase. So some of the distributors were really hesitant to pass on these price increases. We had discussions. We had to prove that the consumers accept these price increases. And I would say we have overcome all the frictions that were connected to the price increases in the last months so that we also will see a strong swing in the distributor business.

So we really had some critical issues in some of our bigger distributor countries. And with this swing, we will achieve double-digit growth for the full year in the distributor business, and we will then be more in line with our expectations than we are in the first half.

Can I maybe just follow up very quickly, that distributor business, are you able to kind of scope it for us roughly how big it is within Rest of World, just ballpark?

It is -- we don't disclose precisely, but I would say it is the biggest part of the rest of the world business.

The next question comes from Bingqing Zhu from Rothschild & Co Redburn.

My first question is about your full year operating margin or EBIT margin expansion guidance. So slight change from previously saying the range of 20 to 40 basis points now to the lower end because it sounds like your H1 margin was in line with expectation in H2, you expect accelerating in the U.S., Rest of Reward and also the full year impact of the price increase. I was wondering kind of what's driving this slightly down of the full year margin expansion guidance? Is that mainly the U.S. margin expansion you said not expecting 50 to 100 basis points? Is that the main reason? That's my first question. Then I have a follow-up, please.

There's so much uncertainty -- there's so much uncertainty, especially in North America, currently with regards to the margin, right? I mean just to give an example, I mean, importing duties, we are not sure yet exactly where it will end up, as an example, from Europe or for cocoa butter from Brazil and things like that. So that's why we felt like it was more prudent to call the lower end of 20 to 40 basis points, but we are confident to be in this range. So we felt in this world of uncertainty, it was just more prudent to -- yes, to call it, including those risks basically.

If I may add to your question, please don't forget we had a onetime impact last year, which was significant. So even if we would end the year with a 20 basis points improvement, you should see that the organic improvement is significantly stronger because we had to compensate a onetime impact that we don't have in '25. So I think it's also more meaningful to analyze the combined progress that we made in '24 and in '25, and this should be then in the area of 80 basis points. So this is a 40 basis point improvement year-over-year. I think it is more meaningful to see it like this.

Okay. I have a follow-up question on the working capital because you mentioned inventory was one of the big driver for working capital movement. Then it seems like the other one is accrued the liability, which you had a similar situation last year. It's quite a big negative accrued liability movement. Can you remind us what's driving that? And how do we think about that for the full year?

That's mainly driven by the variation margin. Okay. By the way, for those of you who have asked two questions, if you have follow-up questions, please just come back, right? No problem. We don't have a lot of pressure right now from a timing perspective.

The next question comes from Callum Elliott from Bernstein.

I wanted to start with a follow-up on the owned retail business. Martin, you sort of gave some helpful color around some of the profitability drivers and Adalbert had obviously shared in the presentation some very impressive growth numbers. Actually just wanted to drill down a little bit further into the profitability because this growth is obviously very impressive. It seems like it's been going on for some time now. And with this ongoing shift towards direct-to-consumer, as you said, there are obviously the unit revenue gross margin uplift sort of to some extent, offset by the uptick in personnel costs.

I wonder if you can talk a little bit about the sort of the net impact of those sort of opposing drivers, gross margin uplift, uptick in OpEx. What does it mean for unit margins and sort of percentage margins? And can this be a driver of margin expansion over the longer term as this channel continues to grow?

Look, I think over the last 3 to 5 years, we have made a lot of progress on global retail, not only on the top line, but also on the bottom line. And our overall profitability of that division is more or less at the same level as the group average now. Having said that, we also measure profitability at store level, so the direct store profit, excluding the fixed costs that are then allocated to each store from the head office costs, let's say, in each country. And typically, when you open a store, implicitly, the divisional profitability as group average, it means that each store is quite above the group average. So basically, it means we only open stores that actually are accretive to our overall EBIT margin, excluding the fixed costs from the head office, which then don't typically go up.

So it's fair to say that it's not a drag, but it's rather an enhancement to our profitability pattern actually in the group. So also from a profitability perspective, we are very happy about global retail.

And in addition, if I may add, we know it's a strong contributor to build brand equity. And we can clearly see connection with a strong retail business or direct-to-consumer business and our progress in brand equity. A market like Brazil, where the main business is deriving from retail. We have a strong brand awareness without having above-the-line advertising. So it shows us that the retail business creates awareness and also a strong brand equity.

Just a quick follow-up. Are you able to frame for us how big the direct-to-consumer business, the own retail business has become today as a percentage of the total company?

It's in the area of 15% of total sales.

Okay. And then look, my second question is more on the first half, second half margin delivery. So as you highlighted, Martin, H1 at 11% right in the middle of your 10% to 12% guidance. It kind of strikes me that a lot of things went in your favor in the first half of the year relative to your expectations as you had set them out in March. So like organic growth much better than guidance, which presumably has a nice margin impact, very nice geographic mix, given how strong Europe was versus the rest of the business that has a very nice margin impact. Cocoa prices also trailed off, moderated as you discussed.

So a lot of positives that went in your favor from this margin perspective. And yet despite those positives, you were still sort of only, so to speak, in the middle of that 10% to 12% range. So I guess my question is, were there any unexpected negatives that explain why despite all the positives you were only in the middle of the range?

I mean there's a managed number, to say like that, that was negative, which is to the pure P&L, but positive to the business. I mean, because we did price increases early on, we wanted to heavy up our advertising in H1. So we have overproportionately spent advertising. It grew actually even more than the sales. So the percent of sales went up in advertising. We feel that's important, right, when you do a substantial price increase, especially in the first weeks and months of this price increase, we actually invest behind the brand to limit the impact on the volumes.

And as we stated also in our comments, actually, even if the 4.6% may not be a great number from your viewpoint, actually, it's better than our own plans. And as we also said, this actually does not show the full picture because in reality, in the North American point-of-sale data sellout, we are significantly better than the 3.7%. So the implied volume decline in the U.S. is actually worse than what we see in the market.

And then for the second half, why are we confident about the second half? Because as Adalbert said at various times, we did not implement all the price increases on January 1. So the impact in the second half is higher, and therefore, that will also help our P&L. So we are right on track. We're actually right on track. So we are not nervous about our profit. We were exactly where we wanted to be. No negative surprises. I mean it was, as I said, a conscious decision to heavy up advertising in H1.

The next question comes from Mikheil Omanadze from BNP Paribas Exane.

I have 2, please. First one would be on the Dubai Style Chocolate. Could you please maybe quantify how much of a contributor it was to your H1 organic sales growth? And how much do you expect it to be for the full year broadly?

And the second question is on the next year. And I understand it's still early, but as things are shaping up now, do you expect FY '26 to be another year of above-average pricing? And I don't know if you can point to any end of the range for 6 to 8 and 20 to 40 basis points for FY '26?

Thank you for the question. So Dubai Style Chocolate, in general, we do not disclose the sales by brand. But as it was also a question in the past time from analysts, we confirm that it is in the area of 1% to 2% of total company sales, and this is exactly where it was in the first half. The second half is in general is stronger. So also Dubai Style Chocolate sales will be stronger, especially as the U.S. is kicking in. On the other side, we expect a slight slowdown in Europe because in Europe, we really saw a hype in the first half of the year, and I think this will normalize.

So at the end, I think this corridor, 1% to 2% should be also a realistic corridor for the full year. Pricing for '26, it is too early to give a clear indication. One thing is clear that the dimension of price increases that we were forced to increase this year, we will not see again in '26. But of course, we will see a carryover also of the price increases that were implemented in a staggered way in this year. So you will see price increases, but on a significantly lower range than published in this year.

We now have a question from the webcast from Fiona Xu, AKO Capital.

The question is, receivables are relatively high given that global retail outpaced wholesale. What drives this? Any particular with partner payment or phasing of sales?

Look, for us, it's not an unusual pattern at this point of the year. So as I said in the beginning, we are managing net working capital. You see the majority of opportunities in the inventory. We had now a higher inventory in H1 because of the value of the inventory. We have a lot of projects ongoing to improve net working capital management, accounts payable, accounts receivable. So we do not see anything that is out of the norm.

As I said before, if someone has a follow-up question on the phone as well, please feel free to come back with follow-up questions because we seem to be almost done with all the questions if you're asking now webcast questions. So if somebody on the phone has more questions, please come back.

We actually have a follow-up question from Tom Sykes from Deutsche Bank.

It was just a follow-up on the comment on Dubai Chocolate. I was just -- I know you said it'd be in the 1% to 2% corridor. But is that something you still expect to be contributing to growth, therefore, in H2? Obviously, you've spoken about the rollout in the U.S.

And would you expect -- and I know you have other innovations, and this is just one product there. Would you expect in H1, therefore, if you're up against tougher comps in H1 next year, it might be difficult to grow Dubai Chocolate in aggregate? Or do you think you have enough new rollouts to still see year-on-year growth for a while yet, please?

So for this year, every sales on Dubai Chocolate is incremental first half and second half. Second half, there was a very low base last year where we sold some handmade Dubai Style Chocolate. So this year, of course, also in the second half, Dubai will contribute to the growth in all regions. If you ask me about next year, of course, we have plans and are working that this Dubai Style chocolate is not a 1-day wonder, but we have innovations in the pipeline. We are extending this recipe into different seasons. So we will come with a Christmas assortment, with an Easter assortment. We will also come with new recipes. So we have a plan that Dubai Style Chocolate will also grow in '26. If this answers your question?

Yes, it does. And I guess a follow-up from that is it's obviously at a higher price point, it's perhaps opened up the possibility of R&D and innovations at a higher price point. Do you -- is that something we should also expect that the follow-on from this is the brand equity benefit from Dubai is something that you feel confident that other innovations can follow on at higher price points, too?

Yes. Okay. I mean, in fact, we are exploring how to extend -- in which direction to extend this success of Dubai Style Chocolate because, in fact, what you say, it is a very premium recipe, complicated also to produce, short shelf life. Therefore, with a special mechanism to market it, it means we do not -- normally, we do not go for shelf placement in wholesale, but we go for in out on displays. So -- but this opens also for other innovations with a short shelf life and with complex recipes to enter into the market. And so in this respect, you're absolutely right. This is what we are exploring right now.

At the same time, we are also exploring products with a shorter shelf life, high-end recipes for our retail channel where we can handle short shelf life products much better. So also Dubai Style Chocolate, for example, in our own retail stores is available year-round because here, we make sure that first in, first out, also products with a 4-month shelf life are not overaging or expiring. So in this respect, yes, our R&D has seen now that we can strive for more complex, more premium recipes that will also enable us to charge higher consumer prices.

We now have a follow-up question from Callum Elliott from Bernstein.

I have 2 actually. So just a follow-on on this Dubai Chocolate. You obviously spoke about the North America launch in the second half of the year. I think there have been some photos floating around recently of the product already in Walmart over the past week or so at a $15 price point. So I guess my question is, as you've been thinking about this launch and obviously planning for the North America launch for some time, how do you balance the sort of like the super premium price point that you were just discussing. Like how and why is Walmart the right channel for that? Is there a brand equity risk of putting it in such a mainstream channel? Is this about sort of sales maximization?

Obviously, you can get a lot of sell-through in a Walmart, but does it risk diminishing some of the brand halo impact that you might otherwise see if you chose to be a bit more selective with distribution. Wonder if you can just talk about the thought process behind that.

That's a very interesting question. Of course, as you know, we are very selective when it comes to the distribution strategy. We are not the only big chocolate manufacturer that is not selling to hard discounters. But Walmart is our biggest customer in the U.S., and it is certainly a customer where consumers would expect our brand, and we have a very strong and good cooperation with Walmart. So just to tell you the success of the Dubai Style Chocolate in the first weeks, I can really say is overwhelming. We got feedback how strong the offtakes at this price point. And this shows us also that the consumers in Walmart are prepared to buy a tablet for $15.

And at the end, we are premium mass market player. So without an impactful and meaningful distribution, we can also not support our brands. And therefore, Lindor as well as Excellence as well as our seasonal products, our premium gift products, but also Dubai Style Chocolate are distributed successfully in Walmart. And we will, of course, also be in all the other wholesale partners that we cooperate in North America. So it's not an exclusive launch in Walmart, but it is just the first step to start distribution in the U.S. and the rest is to follow.

Okay. Very clear. And then my second one is just drilling down into the revised full year organic growth guidance. So obviously, you were at 11.2% in the first half of the year. You guided the new guidance, 9% to 11% for the full year. So you're quite explicitly suggesting that growth is going to slow in the second half. But then just beating everything that you've said about this on the call so far, you said you expect more contribution from pricing in the second half of the year, which seems to be a global thing, that acceleration in pricing. And you also expect the U.S. and the Rest of the World to accelerate from a volume perspective in the second half of the year.

So you seem to be implying that Europe is going to decelerate quite a lot in the second half of the year despite the fact that we're going to get more pricing. But you've also spoken about how the elasticities have been very limited in Europe in the first half of the year. So I guess what I'm trying to understand is, are you just being conservative because of all of the uncertainty that you've spoken about, et cetera? Or is there actually some work that you've done that drive this expectation that for some reason, elasticities are going to get worse in Europe in the second half of the year?

I think, first of all, we have, at any given time, a very precise forecast where we see our business developing. Of course, with all the insecurities that you have always in the business. But this forecast is an aggregation of all the activities that we do of all the influencing factors. Europe, why do we expect Europe to decelerate? As mentioned, the price increases were implemented in Europe earlier than in the U.S. and also in rest of the world. It was more frictionless. It was earlier. So this impact of higher price increases will come more from the U.S. and from rest of the world than from Europe. Then we have had a very early rollout of Dubai Style Chocolate with tremendous volumes in the first wave.

We expect that this will not repeat in the same amount in the second half. So this is why we see that the deceleration in Europe, our biggest segment will compensate partly the acceleration of North America and rest of the world, but altogether should lead to the same dynamics that we have experienced in the first half.

We have a follow-up question from David Roux from Morgan Stanley.

Martin, I had a follow-up question on inventory and particular the bean volumes on the balance sheet. I mean, Lindt, the sourcing of bean cocoa beans and equivalents was down sort of 11% year-on-year in 2024. And I guess in 1H, it was also down. At what point do you expect the business and perhaps the market to kind of go through a restock and accelerate bean purchases? And are you not a bit worried that maybe there's potentially a bit of dash -- kind of a bit of a scurry for beans that could lead prices higher?

I mean from a purchasing point of view, I think there are 2 parts to the question. From a purchasing point of view, we have to buy the beans when they are available. And in Ghana and Ivory Coast, the beans basically available to buy between January and March to simplify because then is when the main harvest happens, starts somewhere around November. So those inventories flow to our warehouses mainly January, February, March, right? And then from West Africa, there's not so much additional beans flowing to our warehouses.

From a pricing perspective, that's the 100 million question, right, where will the cocoa bean prices go from here. As we tried to kind of point out, we are getting good news in general about the pod counts in the countries. So it seems like the harvest in West Africa should be good. We do know that a lot of additional trees have been planted, especially in Latin America. So that gives us a lot of confidence about the midterm.

So we are not nervous about the overall supply situation on cocoa. We believe at some point in time, there will be a turnaround from a market perspective and more cocoa is available and we will have surpluses. All experts actually expect a surplus in this coming crop '25, '26. All the experts we talk to, all the numbers we get everybody expects a surplus. I think that's the reason why we have also seen a decline in the market.

I'm not sure if the market has completely understood the volumes that are negative, right? I mean we are now down 4.6%. We are gaining market shares, volume and price. So I assume -- but obviously, the overall market is also quite significantly down. So I'm not sure if the cocoa market entirely understood that. And that may lead to further declines in the cocoa markets. But look, the market is so volatile that it's difficult to understand exactly what will happen to give you a forecast. That's why we also do hedge and make sure that we don't take the full risk obviously.

We now have a follow-up question from Warren Ackerman, Barclays.

Warren again at Barclays. I've got 2 follow-ups. Firstly, you mentioned cost savings quite a few times in your presentation. I know you don't normally give a number for what the kind of gross or net savings are. But are you able to maybe kind of scope out for us what you're doing? What are the big projects that you had in the first half? Do those cost savings step up sequentially in the second half versus the first half? Any kind of like qualification, if you can't quantify the savings would be useful.

And then the second one, you mentioned this trend around private label gaining share and premium chocolate gaining share. So by definition, the middle being squeezed, and you're certainly seeing that in mass market chocolate volumes. Do you think that trend will continue as cocoa prices come down, this bifurcation that we're seeing? And are you able to say anything specifically in maybe which markets or which kind of SKUs you're seeing -- not you're seeing, but the market is seeing private label gaining? Any countries or any specifics you'd call out where those gains are being experienced?

I mean I quickly start with the cost savings questions. We are basically looking or have started to look 1 year ago or 1.5 years ago, even more intensively at all the areas of the company. I mean, to give you a few examples. Logistics is a super important area where we are continuously improving and getting more and more efficient, especially in North America, but also in Europe, supply chain in general. And a super important area is procurement. We are basically tendering. We are looking at all the big spends, and we are tendering those businesses from media to any bigger categories you can imagine.

We have a big SAP project that we are working on actually, which will also drive savings in the future because we will get more efficient. We have already gone live in 3 countries now in July, and we will roll this out in the entire company over the next 3 to 5 years. So that will also drive savings going forward.

And last but not least, bear in mind that our volumes are slightly down. So we do not need to hire additional headcount in the factory, like temporary workers that we typically hire for the season, we do not need exactly the same amount. And on a fixed headcount level, we are really trying not to increase that because our volumes are not going up. So then we get really a substantial leverage on our bottom line if you can do that, that's what we are doing at the end of the day.

We are not touching the recipes, and we are -- also as a rule, we are not doing any shrinkflation, right? We are not downsizing packaging sizes and we are not changing recipes to buy cheaper ingredients. Those 2 things are really kind of for us, untouchable.

Okay. To your first question, Warren, how do we see the future of this trend, private label gaining -- premium brands gaining, especially your question was when prices are coming down? I mean this is hard to predict. We can only observe what's going on now. And what we see now is the private label and premium is gaining share globally. So it's not a specific region where we see this. It has also some practical reasons. Private label operates with significantly lower margins on lower price points. So when raw material prices increase, they are forced to increase prices significantly higher. And as they are still perceived as the cheapest option in the market, we see that they simply grow by the very strong price increases in value.

And at the same time, when consumer sentiment is weak, people skew towards the cheapest brands in the market, and that's private label. And at the same time, we see that the affluent consumers with a low consumer sentiment and this consumer sentiment is also observed across the globe. They cut back on bigger tickets and then the premium chocolate become this small affordable luxury. And this is, I think, the reason why people then go for a small treat with a chocolate instead of going out or reduce their out-of-home consumption, vacation spendings, et cetera, et cetera.

So I cannot give a clear projection what will happen when prices come down. We are confident when prices come down that premium will stay on trend because this is a long-term trend. This positive trend of private label is a short-term trend observed mainly in the last years. So my projection would be that this could, let's say, go away, but the premiumization globally should stay.

We have a follow-up question from Antoine Prevot from Bank of America.

So 2 from me. So on the store network, you said it's margin accretive. Any information maybe on the retail store margin right now? Because I mean, raw material inflation is less of an issue in that part of the business, while the level of pricing is quite high. And as you said, there is a lower elasticity level. So any indication here would be super helpful.

And second, also on stores, I mean, you have clearly accelerated the store openings. When you open a new store, what is generally the payback period you are looking for regarding your investments?

I'll start with the payback. I mean, one important key figure for us is the payback, yes, but another important one is, of course, the IRR that we actually above our target, which is typically above 20%. We are looking at the net present value. We are looking at the direct store profit, the number I mentioned before because the direct store profit, so the profit of that store without the head office fixed costs was below the, let's say, 16.4%. That is our target for this year.

This would obviously not be accretive. So we want the direct store profit to be substantially above the 16.4%. I'm not disclosing numbers here. So -- and then payback, typically, I would say, around roughly -- I mean, this is now a very -- it depends store by store, right? But I would say somewhere in the neighborhood of 3 years.

To your first -- the first part of your question, as Martin has mentioned before, we have improved the profitability of our retail division significantly across the last years. And this also led to the fact that we say we can now accelerate the expansion, we can scale our retail footprint because we have an accretive business and it used to be dilutive before. When you see 60 new stores versus prior year, this also means that we have no more necessity to close stores.

In the past time, this figure of expansion was always impacted by a silo of new openings and at the same time, closings of stores that were not profitable. In the recent years, I think we have really cleaned the portfolio of our retail stores. We had more or less no closings anymore. And so the expansion is also more visible because the silo or the net figure of openings and closings are more on the side of the openings.

To the retail margin in general, I think we have very healthy margins, and we have also very healthy comp store growth, which further drives the profitability of our store network, plus we are entering new geographies. You have read in our full year report, we go into completely new countries with retail store expansion. So we can also expect in the years to come a significant number of new retail stores year after year.

We now have a question from the webcast from Essie Young LGT Capital Partners.

The question is, will growth in EU decelerate in second half given that growth in North America and rest of the world will accelerate in second half? And if so, why? Do you see price elasticity in EU pick up?

This question has already been answered before because somebody asked the same question. Any other questions?

We now have one more question from the webcast from Paula Doenecke from Bloomberg News.

Can you please go into more detail why you still expect cocoa price inflation into 2026?

Yes. I mean this is driven by the fact, as I mentioned before, that we have a relatively long supply chain. The cocoa supply chain is a long one. You buy the beans basically well in advance because the beans do not flow 12 months during the year, but you have a harvest, which takes normally 3 to 4 months. So if you want to buy West African beans of higher quality, you need to receive those ones in January, February, March.

At the moment that you receive the beans, you have obviously locked in the price. And those beans, they will also actually, to some extent, at least be used in the year -- in the following year, right? So the beans that we have now in the warehouse in the different countries, we are not only using them in '25, but to some extent also in '26. That's why you have kind of a lag with regards to the pricing of the futures, right? When it goes up, you have a benefit because it's a bit slower. When it goes down, it does not immediately go down. I hope that's explained in a simple enough way. Any other questions?

That was the last question. Back to you for any closing remarks.

From our side, thank you for the questions and for the interest, and wishing you a good day.

Thank you very much.