54) Hotel Chocolat

wēi  danger

Hotel Chocolat, the upmarket confectioner, was founded by Angus Thirlwell and Peter Harris in 1993.  I’ve always been a fan – not least because the company has consistently turned its challenges to opportunity.  For example, when it struggled to maintain quality cocoa supply it bought an Estate (Rabot Estate in St Lucia) – this in turn became a phenomenal provenance story.  Or, when it couldn’t muscle its way into big retailers it direct sold through catalogue.  It also grew a Chocolate Tasting Club (a subscription service which currently has about 100,000 members) which has created a community of evangelists and made demand more predictable.

It’s a great business, since its launch 20 years ago it has been profitable every year bar one and has continued opening stores during the downturn.  The company has been self-financed to date but its recent successful US store launch has revealed the global potential.  It’s time to expand before competitors enter the local markets but surely the team will have to give up its 200% ownership to fund expansion?

jī opportunity

As always Hotel Chocolat has approached the problem creatively.  Instead of raising expensive equity or debt it announced a very different approach – the company plans to raise £5m by selling “chocolate bonds” to its most loyal customers, taking advantage of rock bottom interest rates.  The investment opportunity will be marketed to the members of Hotel Chocolat’s Tasting Club – ‘Investors’ can subscribe for a three-year, £2,000 bond, which will deliver a “tasting box” of chocolate worth about £18 every two months — equivalent to a 6.7% yield.   The money raised will help to expand the high street chain from 42 to 72 shops, enlarge the Huntingdon factory, develop a new cocoa plantation in St Lucia and expand the business overseas.  Angus Thirlwell, co-founder, said: “We would rather pay interest to our customers than a bank. Many who have money sitting in the bank getting a low interest rate may prefer to be paid in chocolate.” The company is on track to deliver a 20% rise in turnover to more than £50m this year.

How About…

  • Fundraising from less obvious sources, e.g. your most loyal customers?
  • Using the fundraising process to bring in a community of evangelists?