Mars x Hotel Chocolat
The business news that matters
Hello and welcome to the latest edition of Off to Lunch…
Mars has agreed to buy Hotel Chocolat for £534 million. The shock takeover was announced in the City this morning and is still being digested…
Mars is, of course, one of the biggest food companies in the world. The company makes Mars chocolate bars but also owns a collection of other well-known brands including Pedigree pet food, Dolmio pasta sauce and Ben’s Original rice. The company was founded in 1911 and is still owned by the Mars family. It generated annual revenues of more than $45 billion (£36.3 billion) last year.
Andrew Clarke, the global president of Mars’s snacking division (and a Brit who started his career at Marks & Spencer), said the company had “long admired” Hotel Chocolat and its founder Angus Thirlwell.
Clarke said that Hotel Chocolat is a ”differentiated and much-loved brand, with an impressive product offering and a deep commitment to its values of originality, authenticity and ethical trading”.
On the rationale for the deal, Clarke added:
“Mars has a long and proud history in the UK, and today's announcement further strengthens our commitment to this important market by bringing an exciting brand into our portfolio and deepening our relationship with consumers. Building on the strong foundations that Angus, Peter and their team have established, we are very excited to support Hotel Chocolat's next phase of growth.
“We are confident that Mars will be an excellent long-term home for Hotel Chocolat, providing a like-minded, entrepreneurial and purpose-led environment in which to maximise the potential of the Hotel Chocolat brand which is already so beloved by consumers."
Mars is paying a hefty premium to buy Hotel Chocolat. The deal is priced at 375p per share in cash, 170 per cent more than Hotel Chocolat’s closing share price last night. However, that 375p price is still well below the peak that Hotel Chocolat shares hit at the end of 2021, as you can see from the graph below…
Hotel Chocolat was founded in 1993 as a premium chocolate brand with high-street shops. The company manufactures its own chocolate - working with farmers to source cocoa - and then sells it through 131 shops in the UK as well as an online business, wholesale agreements and other formats like cafes, restaurants and hotels.
Angus Thirlwell, the co-founder and chief executive, said:
“Hotel Chocolat's brand destiny is to become a leading premium chocolate brand in major markets through reinventing chocolate for people and nature. In Mars we have found a true meeting of minds - in strong cultural values, bold strategy and true long-termism.
“Our gentle farming programme has got off to a promising start and we truly believe it can help make cocoa agriculture right for nature and for people. Joining forces with Mars to achieve an increased positive impact, is a huge attraction for us.
“We know our brand resonates with consumers overseas, but operational supply chain challenges have held us back. By partnering with Mars, we can grow our international presence much more quickly using their skills, expertise and capabilities.”
You can find the full announcement by the two companies here. The board of Hotel Chocolat has recommended that shareholders vote in favour of the deal. For more background on Hotel Chocolat I recommend checking out a superb analysis by retail executive Ian Shepherd from earlier this month. He wrote that Hotel Chocolat is a “terrific retail business” but is facing big challenges - including an expensive and failed attempt at overseas expansion, rising costs, and a squeeze on premium products from the cost-of-living crisis. Shepherd said:
I have no doubt Hotel Chocolat will weather the storms it has been through and come back stronger. It is a fantastically executed product with colleagues in store who obviously care about the product and the business, and at some level you can’t go wrong if you have those ingredients in your business.
But nonetheless the business has had some of the gloss taken off it by these last couple of years, and many of us in the sector will share some or all of these experiences.
You can read that analysis here. FT Alphaville has also looked at how the initial announcement about the deal this morning failed to replace the codenames used during negotiations. So Hotel Chocolat was “Queen Bee” and Mars was “Beekeeper”. Oops. You can read about that here
This isn’t the only deal that has been announced today. Young’s, the pub group, has agreed to buy smaller rival The City Pub Group for £162 million. The takeover will expand Young’s collection of pubs by 50 to 279. City Pub Group has locations across London, south England and Wales. You can find the announcement on that deal here
However, there is bad news from Burberry today. Shares in the luxury brand have fallen more than 10 per cent after the company warned that it is “unlikely to achieve our previously stated revenue guidance” for this year. Burberry said there was a “slowdown in luxury demand globally”, picking out China in particular. You can read more about that here
Other stories that matter…
1. Jeremy Hunt, the chancellor, intends to extend the tax breaks available to freeports by another five years to 2031. The measure is likely to be announced in the Autumn Statement next week, according to the Financial Times. The government has so far approved the creation of eight freeports in the UK, which have been set-up to attract investment to the local area. You can read more about the government’s plans here. Sticking with the challenges facing inward investment in the UK, the FT has also looked at the story of Swindon in Wiltshire. In the 1970s and 1980s this was the fastest growing town in Europe, with companies such as Intel and Motorola opening in the area. However, investment has slowed and Honda, the carmaker, has closed its factory in the town. You can read more here. Meanwhile, Lord Harrington, the former business minister, has produced a report for the Treasury about how to attract more overseas investment into the UK. The government will publish the report next week. Sky News’ Mark Kleinman says that Lord Harrington will recommend that each government department has a junior minister dedicated to promoting investment and that a new business investment fund is created to work with overseas companies to help them expand in the UK. You can read more here
2. An example of the extraordinary innovation taking place in the UK: regulators have approved a gene-editing tool called Crispr for medical treatment. This is the first time anywhere in the world that the treatment has been approved. BBC story here
3. There are likely to be lots of “One minute to midnight” headlines in January 2024. This is because the Doomsday Clock could be set at 60 seconds to midnight by the Bulletin of the Atomic Scientists. This clock was created in 1947 by leading scientists to measure how close humans are to destroying themselves. The clock is currently set at 90 seconds to midnight but the next update in January is likely to move closer to midnight due to advances in AI technology, wars in Europe and the Middle East and concerns about climate change. This is according to the latest Faster, Please! tech newsletter (Rishi Sunak is an avid read). However, Faster, Please! argues it is time to replace the clock. Instead, a clock should be launched that “suggests how close we are to the dawn of a new age of abundance and opportunity rather than the midnight of our existence”. Advances in AI technology, medical improvements that are extending human lives beyond 100 years, and a new era of space travel show that there are plenty of reasons to be optimistic. You can read more here
4. Talking of AI, here is some of the latest news on the technology. Firstly, OpenAI has paused sign-ups to the latest version of ChatGPT because demand has exceeded its capacity. You can read more here. Secondly, Microsoft boss Satya Nadella has given an interview to MIT Technology Review in which he says the company is focused on getting their latest AI technology into the hands of developers around the world to see what they can do with it. Piece here. Lastly, AI could pose a new challenge for corporate communications because it is capable of analysing the words used by executives in financial results to predict when a company could be heading for trouble and miss future expectations. Piece by Klement on Investing here
5. The British venture capital investor Sir Michael Moritz has committed more than $300 million (£242 million) to supporting San Francisco, which is where he lives, and improving local infrastructure. This includes backing a new local news service called The San Francisco Standard. Moritz left his role at Sequoia Capital earlier this year. You can read more about his plans in a Bloomberg piece here
And finally…
Yesterday I shared a guide to the 19 cosiest winter restaurants in the UK courtesy of the Financial Times (you can find that here). I have a slightly different list for you today from The Times: a list of the 17 best burgers in the UK and where to get them. MeatCastles in Doncaster is number one. Other names on the list include Mollis Fried Chicken in Nottingham, Burgerism in Manchester, and MeatLiquor in London and other locations. You can find the full list here
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Best
Graham