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Hotel Chocolat sees more than half of sales start online as digital ‘more than mitigates’ retail disruption

Angus Thirlwell

Virtual tastings, subscriptions and online sales have all helped Hotel Chocolat to counteract the effects of Covid-19 disruption through a pivot to digital. 

The retailer, ranked Top50 in RXUK Top500 research, says that 51% of its UK sales started in digital channels including online sales, subscriptions and virtual experiences such as tastings – and that its multichannel model “more than mitigated retail disruption”. Visits to its stores grew between July and October but that after that lockdowns and Tier 4 restrictions “materially disrupted” its seasonal peak. 

The update came as the retailer reported sales of £101.9m in the six months to December 27, 11% up on the £91.7m it reported at the same time last year. Pre-tax profits came in at £15.5m, 3% up from £15m last time. The impact of Covid hit its profit margins, which fell to 61% from 65% a year earlier, as shops closed and shoppers made more of their purchases online, especially during lockdowns. As a result, the retailer had to clear stock from its shops, limit its online range and run more promotions.

Hotel Chocolat said its multichannel model supported UK sales growth of 12% during the period, as it added 0.6m new customers – representing 38% growth – to its loyalty VIP Me database that previously included 1.5m people. It says it remains committed to its stores as “a powerful way to recruit profitable new multichannel customers” and because “they deliver the deepest brand experience”. It will open three new UK stores 2021, and has renegotiated 13% of its leases, while 56% of locations have a “lease event” within the next two years.

Sales in its Japan joint venture – where no lockdowns were in place during the period – were 228% ahead of last time, while its sales in the US grew by 11%. In this market, first quarter sales were 17% down as stores closed both in lockdowns and throughout the period in areas that are primarily used by commuters, such as transport hubs and office locations. But in the second quarter, a shift to digital saw sales grow by 22%, and its customer database by 170%. 

Angus Thirlwell, co-founder and chief executive of Hotel Chocolat, says: “We certainly kept the chocolate flowing thanks to our online capabilities and multichannel expertise. We recorded superb results in the UK, USA and Japan despite Covid-19 restrictions affecting all our physical locations. We achieved sales growth during those periods when all UK physical locations were closed, demonstrating the brand’s appeal to our loyal customers, and our flexible business model. 

“In the UK, our multichannel model truly came of age, and excitingly, both Japan and the USA firmly stepped up from the ‘test and learn’ phase into ‘grow and scale’. Total brand sales, through direct-to-consumer and partner-channels combined, increased 16% year-on-year.”

During the half-year the retailer launched a new gifting app, and says a new EPOS platform set to launch in its 2022 full year will bring “further opportunities to engage, driving frequency and lifetime value”. 

The retailer has extended both its distribution centre and its factory capacity during the year. It extended production to 24 hours a day, enabling it to make up to 40% more chocolate, and now has outline planning permission to extend its factory – boosting capacity by another 200%. 

It has also taken the opportunity of its Saint Lucia Rabot Estate hotel being closed by Covid travel restrictions to upgrade the site, adding hotel room capacity and a Project Chocolat visitor attraction, while launching a Rabot Coterie subscription of chocolate produced through a “climate smart” gentle farming concept. 

The retailer is working towards 100% recyclable packaging and says 93% of its packaging is now recyclable. It takes its flexible packaging, which cannot yet be recycled in the UK, back in its stores. 

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