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On the shop floor with……Hotel Chocolat co-founder Angus Thirlwell

It is difficult to think of another product category that is quite as flexible as chocolate, with the ability to sculpt it into any shape you wish and to flavour it with pretty much anything that takes your fancy. By Glynn Davis

On the shop floor with……Hotel Chocolat co-founder Angus Thirlwell

It is difficult to think of another product category that is quite as flexible as chocolate, with the ability to sculpt it into any shape you wish and to flavour it with pretty much anything that takes your fancy. By Glynn Davis

This enables multi-channel chocolatier Hotel Chocolat to change as much as 30 per cent of its range each year thereby keeping up the interest levels of its loyal customer base and also continuing to attract new fans.

What also helps its new product development pipeline is the fact it has its own chocolate factory that it opened five years ago, which enables it to keep on churning out new ideas and bringing them to the market in double-quick time.

Angus Thirlwell, co-founder of Hotel Chocolat, likes to refer to the company as an ideas business and its vertically integrated structure certainly helps it to get these ideas into production most effectively.

When the company was set up in the mid-90s it outsourced production but the frequent leak

ing of the company's ideas into the market proved frustrating so the decision was taken to open up a factory in Huntingdon.

“The decision was not taken because of quality control issues but to protect our intellectual property. Even though there were contracts in place our ideas would leak into the marketplace,” he explains.

This led to the issue of many legal letters before the factory was opened and the company is now “like the fast fashion players such as Zara with an awesome ability to get things into the marketplace”.

This market comprises its glossy catalogue, its 32 company-owned stores in the UK, its online shop, its soon-to-open franchised outlets in the Middle East, as well as its tie-ups with John Lewis on Oxford Street and the World Duty Free shops in airports.

This multi-channel approach has been built up gradually over the years, with the business initially called ChocExpress and based around advertisements in the national newspapers. In order to generate re-orders a catalogue was then developed, which was spotted by AT&T in 1997 that was looking for online concepts and helped fund the creation of the company's first website.

Around five years ago the company then changed its name to Hotel Chocolat. “We wanted a brand name that more accurately reflected the aspirations and quality of the brand,” says Thirlwell.

The first store then followed with the Harlequin Shopping Centre in Watford the chosen location because it was “neither upmarket nor downmarket and if it worked there then we could make it work anywhere”.

The chief worry of Thirlwell and co-founder Peter Harris was that the sleek contemporary look might make the store appear too exclusive but their concerns were unfounded and with some tinkering they got the model working.

Next stop was Milton Keynes, followed by Cambridge and then St Albans. With the store numbers now at 32 Thirlwell says he is keen to push ahead with more units. “We've an appetite for more stores but it depends on the right deal. The thing we like at the moment is that landlords will give break clauses,” he says.

The expectation is that up to 10 new units could be opened over the next year with locations on the hit list including the Trafford Centre in Manchester, Oxford, Guildford, Glasgow and parts of London. “There are many big places that we are not yet in so there is plenty of scope,” says Thirlwell.

Some of these new outlets might include the company's fledgling cafs, which are presently located within its Kensington and Bristol shops. Like everything at Hotel Chocolat, Thirlwell says the concept is being very carefully tested: “The caf parts might need to be bigger or smaller or just stay the same, we don't know yet. We like to have these live tests because we want to work with our customers. We don't like market research.”

This preference for using its customers' feedback led to the development of the company's Tasting Club, which now has an impressive 100,000 members who receive regular batches of chocolates, which include trial flavours. These are then scored by the club members and the most highly-rated are likely to go into full production.

This careful and considered approach combined with what Thirlwell describes as a “prudent approach, and a ploughing back of all money into the business” has ensured Hotel Chocolat has avoided any serious mishaps and the two co-founders have managed to retain 100 per cent ownership of the company.

This represents a growing bit of equity as the company racked up sales of 50 million in its current financial year and continues to perform well across its various channels - with 50 per cent of turnover derived from its stores and the remainder from its other routes to market.

Further evidence of its measured approach is its decision to develop an international arm, which Thirlwell says is to avoid being “over-exposed” to the UK market. The franchise route is being taken as he says there are many good examples of this form of expansion working well overseas. They include Prontaprint, which his father founded and then sold on some years ago - he now runs an ice cream business in Barbados.

Visiting his father in the Caribbean will undoubtedly become more frequent with the forthcoming opening of a second Hotel Chocolat manufacturing plant, in St Lucia, where the company has owned its own cocoa estate for some years.

The output from the factory will be split between the 600,000 people from the UK who visit St Lucia each year, the local population, and the remainder of the production will be shipped in sealed vats on the banana boats to the UK,

Because of the chemical structure of chocolate Thirlwell says the cocoa crystals will simply need to be re-aligned through a specific heating process on arrival in the UK before the chocolate can be used to create more of the company's tasty products.

This is yet another example of the great flexibility of chocolate and why there should be plenty more opportunities for Hotel Chocolat to further develop its business in the future, especially as it also continues to sensibly grow its part of the value chain.

glynnd@theretailbulletin.com

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