Mars to buy Hotel Chocolat to help expansion overseas

Image source, Getty Images

Confectionery giant Mars has announced it will buy Hotel Chocolat for £534m to help the UK company expand overseas.

Hotel Chocolat said the deal would allow the brand to "grow further and faster".

"We know our brand resonates with consumers overseas, but operational supply chain challenges have held us back," said Hotel Chocolat chief executive Angus Thirlwell.

The company is mostly based in the UK with 124 shops, but has some overseas.

Mr Thirlwell said: "By partnering with Mars, we can grow our international presence much more quickly using their skills, expertise and capabilities."

Following the announcement of the deal, the retailer's share price soared by more than 160% to 365.21p.

Mr Thirlwell is a co-founder of Hotel Chocolat with Peter Harris and they will make more than £144m each from selling the business to Mars. Mr Thirlwell, who will stay on as chief executive, said that he will invest 80% of the money back into the company.

He added that Mr Harris, who will retire, with also invest some of his windfall in Hotel Chocolat under Mars's ownership but did not say how much.

Hotel Chocolat was founded in 1993 and opened its first shop, in north London, in 2004.

Commenting on whether Mars intended to change Hotel Chocolat's recipes following the takeover, Andrew Clarke, global president of Mars snacking, said there were "absolutely no plans" to do that.

"We've got a real track record here of nurturing, protecting and accelerating brands and actually keeping that entrepreneurial nature at what that brand stands for," he said.

There are also no plans to start selling Mars confectionary in Hotel Chocolat shops.

Hotel Chocolat's overseas expansion has been costly and problematic.

In September last year, it announced the closure of its five shops in the US at a cost of £3.5m, but it continues to sell online, focusing on its Velvetiser hot chocolate-maker.

Earlier this year, it announced a joint venture in Japan with Tokyo's Eat Creator Corporation to set up 21 Hotel Chocolat shops after its first deal fell apart.

It previously had a partnership with Chris Horobin, the former boss of QVC Japan, to open stores in the country. However, that deal ended and resulted in Hotel Chocolat writing off nearly £22m.

The company now holds a 20% stake in the joint venture with Eat Creator and will receive royalties from the deal.

Commenting on its past difficulties with expanding internationally, Mr Thirlwell said: "Building a brand overseas is not a short-term fix."

He said that while there was "huge appeal" for Hotel Chocolat and its products overseas: "What we found more difficult and what was going to require more capital and more work was the operational elements of the business so that includes manufacturing in country, distribution and the behind the scenes element that customers don't really see.

"This tie-up with Mars is actually all about solving that for Hotel Chocolat."

It also owns an estate in Saint Lucia, which has a 140 acre farm that produces organic cacao and is where the company operates the Rabot Hotel.

In its most recent results, Hotel Chocolat disclosed impairment charges on the estate because of "continued Covid-19 disruption where visitor numbers to the island have not recovered to pre-pandemic levels".

The company also has shops in Ireland and Gibraltar.