The Hotel Chocolat story is based on a simple mission – to create a new model of aspirational luxury that democratises access to premium chocolate by rejecting the notion of “choco-snob elitism”.
Starting out as an online chocolate seller in 1993, Hotel Chocolat has evolved to become a market leading £105m business with 100 stores across the UK. In 2017 alone the company’s revenue rose 12% year on year, with pre-tax profit doubling to £11.2m.
Crucially Hotel Chocolat has carved out a distinct point of difference as the only company in the UK to grow its own cocoa, which originates from the 250-year-old Rabot Estate in Saint Lucia originally purchased by business founders Angus Thirlwell and Peter Harris in 2006. The company opened its first luxury hotel, spa and restaurant on the plantation in 2011, extending the proposition from retail to holidays, food and events.
Growth has been fuelled by customers, with Hotel Chocolat raising a healthy £4.2m through its first round of ‘Chocolate Bond’ crowdfunding in 2010. The company has consistently shunned above-the-line advertising, relying instead on its strong visual identity, storytelling ability and expanding store estate to grow the brand. Alongside its own retail and online channel, the brand also sells through Amazon, Ocado and concessions within department stores such as John Lewis and Fenwick.
The Hotel Chocolat philosophy is grounded on three principles of innovation, authenticity and ethics, enshrined by the company’s two founders. Speaking to Marketing Week at the British Retail Consortium’s Future Retail Leaders Lecture 2018 last week (23 January), owner and co-founder Angus Thirlwell explains how the brand used the opportunities offered by marketing to stand out in the crowded UK marketplace.
“When we created Hotel Chocolat the leader in the UK was Thorntons and the perception of the market was that premium chocolate was done,” he says.
“Thorntons had 800 locations across the UK and was by far the market leader. There was a Belgian style of chocolate, a Swiss style and a British style epitomised by Thorntons, a very mature, steady market with not very much place to go. But by finding an edge and a point of difference we were able to harness the excitement of our team and bring something new to the consumer.”
Creative led marketing
The significance of marketing to the business could in part originate from Thirlwell’s own background. He met co-founder Peter Harris while working at a French tech firm after interviewing him for a sales and marketing role. The pair went on to found The Mint Marketing Company in 1987, a firm selling branded packets of mints, which then morphed into online chocolate business Choc Express in 1993.
One of the UK’s first online retailers, Choc Express evolved into a profitable business, although Thirlwell began to realise that the brand name was underplaying the product’s potential.
“When we created the brand in 1993 I knew what it was like to have a fundamentally good business and actually a pretty terrible brand. I knew we weren’t getting any brand lift at all and the brand on the lid was underplaying the potential of the chocolate inside,” he explains.
It was in 2004 that Choc Express rebranded as Hotel Chocolat, a name evocative of the escapism possible through chocolate. Thirlwell believes the word ‘Hotel’ is even more important than the world ‘Chocolat’ in the brand name for its ability to transport the customer to a different place.
Under this new identity Hotel Chocolat opened its first physical store in Watford in 2004. During the intervening 14 years the company has expanded to 100 shops, cafes and restaurants across the UK, three chocolate boutiques in Copenhagen and a franchise agreement with the Sogo department store in Hong Kong.
The growth strategy is focused on the democratisation of chocolate, says Thirlwell, taking Hotel Chocolat nationwide from train station locations to regional flagships and smaller stores.
“With my business head on I don’t want to do something that might be just a tiny business that operates from a store in Belgravia. If you’re going to do it you need to do it properly at scale and do something exciting,” he explains.
“Secondly, from a fairness point of view chocolate is one of the few luxuries that virtually everybody in UK can afford to have and we’re in the lucky position of being able to make that happen without any compromise.”
The brand experience is designed to “empower the customer”, enabling them to choose from a wide price range that starts with a £1 treat and climbs to a £10,000 stay at Hotel Chocolat’s Saint Lucia cocoa estate. The idea has always been to have a strong price architecture with real stretch in order to open the brand up to as many customers as possible.
Driving repeat business
Starting off in the online market during the early 1990s gave the Hotel Chocolat team a real appreciation of the power of customer data, and put it ahead of many bricks-and-mortar retailers.
“It’s the opposite way that most people choose for a chocolate business, but as it happens it was almost by accident the right way because it meant that we knew exactly who are customers were, what they wanted from us and how to keep them loyal,” Thirlwell explains.
“Most startup chocolate brands begin selling through supermarkets and concessions, so they haven’t got that connection with the consumer. All they can do is listen to what the department store buyer is telling them. We all know that data is everything and if you can see the consumer behaviour you can adapt and respond.”
While Hotel Chocolat has rapidly grown its store footprint, the focus on online remains at the core of the business. In 2017 the brand experienced a 30% growth in conversion from its website, while over 50% of its web traffic comes from mobile.
This appreciation of data helped Hotel Chocolat make an early play for the subscription market with the creation of its members’ Chocolate Tasting Club in 1998. The idea was to encourage customers to engage with Hotel Chocolat on a repeat basis, rather than simply seeing it as a gifting brand.
Twenty years on the club now has 55,000 members who receive a monthly selection of the latest recipes direct to their door. Subscription customers are the most loyal and highest spending of any of Hotel Chocolat’s customer segments, according to Thirlwell. He attributes this to the fact that the subscription product gives the brand a regular opportunity to share stories with its customers, meaning they are most informed about its grower-focused ethics programmes.
Subscriber feedback is also crucial for innovation, helping the brand trial new flavours developed at its Cambridgeshire-based inventing room.
“We put our new recipes into our subscription products and the Tasting Club members score them, we receive the scores and then the results are shared inside the club, good or bad. With many of the chocolates the recipes don’t make it any further than that,” says Thirlwell.
“The third edit is our Selector range with the six chocolates and if it gets through all those it stands the chance of getting into the Sleekster boxes, which are meant to be the cream of the cream and the most ‘giftable’ proposition we have.”
The domestic market is a driving force for the business, accounting for 96% of Hotel Chocolat’s sales during 2017. While the brand has expanded with own-retail in Copenhagen and a franchise tie-up in Hong Kong, Thirlwell sees real opportunity for Hotel Chocolat to become a truly global brand.
However, he argues that while the international market loves the company’s modern British identity, it would be a mistake to refer to the UK’s chocolate history.
“[We would not associate ourselves] with British chocolate because British chocolate pretty much has been seen as the worst chocolate in the world up until recently,” he claims.
“But if we associate ourselves with British culture then it’s the most powerful support we could possibly get. Think about fashion brands like Paul Smith, Stella McCartney and Burberry. Our music culture is the best in the world, [we have] fantastic drinks brands, car brands, our sense of fair play, our democratic institutions, our sense of humour. British culture is highly respected and sought after and we want to associate ourselves with that.”
The company is carefully researching a variety of potential new markets with the ambition to become the best luxury chocolate brand in the world. The company’s ‘More Cocoa, Less Sugar’ philosophy is already proving a hit with its customers in Denmark and Hong Kong.
Marketing will be central to this global push, powered by an integrated internal marketing team embedded with the product developers and chocolate makers. The marketers are supported by 15 in-house designers who work on the brand’s entire visual identity from its packaging and digital presence to customer catalogues.
“I truly believe in the power of design as almost the best way to communicate and even better if that’s already stitched into the identity of your product,” Thirlwell adds. “It’s ambient marketing, which is the smartest marketing of all.”