Mars x Hotel Chocolat part II
The business news that matters
A scheduling note: There will be no Off to Lunch on Monday. We will be back on Tuesday
Hello and welcome to the latest edition of Off to Lunch. Happy Friday…
Today I want to revisit the £534 million takeover of Hotel Chocolat by Mars because it is such a fascinating story - one that covers passionate founders building and then selling their business, a big US company investing in the UK, and what it says about trying to grow a business in the UK.
You can find our initial summary of the deal in yesterday’s Off to Lunch here
The co-founders of Hotel Chocolat - Angus Thirlwell, the chief executive, and Peter Harris, the development director - own 54.2 per cent of the company and stand to make £280 million from the takeover. Harris plans to cash-out and retire from Hotel Chocolat. However, Thirlwell, who turned 60 in April, will remain as chief executive. He has pledged to reinvest 80 per cent of his proceeds from the sale back into Hotel Chocolat to help it grow.
On calls with the media and City analysts yesterday, Thirlwell said that Mars will help Hotel Chocolat to “scale much more quickly”. Alistair Osborne’s column in The Times looked in detail at Thirlwell’s comments about why he had chosen to sell to Mars. He wrote:
While a big US corporate, Mars is also a family business with 10,000 workers in Britain and a factory in Slough. Andrew Clarke, president of Mars Snacking, says the group is built on investing “for the long-term”, with a record in taking “entrepreneurial businesses to the next level” — Royal Canin pet foods and Kind snack bars being two cases in point. As Thirlwell puts it, too: “I won’t change my view that confectionery is very different from chocolate and I don’t think Andrew and I will fall out over that.”
Besides, he was in no position to resist. Hotel Chocolat, which has 131 stores over here, a partner in Japan and a cocoa farm in Saint Lucia, has shown itself lately to have too much of a soft centre: profit warnings after a botched attempt to open stores in America and an £6.2 million full-year loss. The result? A share price that hit 532p in October 2021 had been melting away.
You can read that column here
Others have suggested that the deal is another example of how difficult it is to grow a business on the public markets in London. Matt Moulding the chief executive of Manchester-based tech company THG, posted on LinkedIn about the deal. THG has also had a challenging time as a listed company…
Moulding concluded by saying:
The demise of the LSE won't be fixed by forcing regular people to hand over their pensions. Surely, first we need to address the real factors causing Hotel Chocolat & hundreds of others to flee London.
However, the deal is also a vote of confidence in the quality of businesses being built in the UK. It is a similar takeover to Coca-Cola’s £3.9 billion acquisition of Costa Coffee from Whitbread, albeit on a smaller scale.
For more background on Thirlwell and how he built Hotel Chocolat I recommend checking out a detailed profile that Mail Online has published. The profile describes Thirlwell as “the real Willy Wonka” and notes how he learned about entrepreneurialism from his father Edwin, who launched Mr Whippy ice cream and then built the Prontaprint high-street printing business. It also looks at how Thirlwell and his Hotel Chocolat co-founder Harris initially focused on selling mints with corporate logos on them - the business was called the Mint Marketing Company - before pivoting to selling chocolate after concluding that the market for mints was too small and niche. You can read that piece in full here
Other stories that matter…
1. The veteran retail analyst Nick Bubb describes the Office for National Statistics as “Planet ONS” because he thinks their retail sales figures are so detached from reality and unreliable. So, treat the latest retail sales data from the ONS with some caution. They show that retail sales volumes (the quantity of products bought) fell by 0.3 per cent month-on-month in October and 2.7 per cent year-on-year. This means that retail sales volumes were their lowest since February 2021, according to the ONS. Economists had expected the data to show that retail sales rose in October. You can find the full ONS report here. Sticking with retail, now that inflation is easing, Soumaya Keynes has written an interesting column in the Financial Times looking back at the greedflation debate. Did companies take advantage of the economic backdrop to put their prices up more than warranted to fatten their profit margins? And what did we learn from the debate in general? The column looks at the research that has been done on this topic to conclude: “In trying to maximise profits some companies helped a cost shock to propagate through the system.” You can read the column here
2. Amazon is going to start selling cars online. The retailer has teamed-up with Hyundai to launch the service. More details here and the announcement by the companies here
3. Subscriptions for ChatGPT are being sold on eBay after OpenAI stopped taking on new customers due to a surge in demand. Story by Mashable here. Also on AI, the former head of audio at Stability AI says he quit the company, which has offices in the UK, because he disagreed with using copyrighted work to train its products. You can read his interview with the BBC here
4. The UK has missed out on billions of pounds of investment by businesses since 2010 because the government has constantly changed its approach to industry and ministers have changed roles too frequently. That is according to a new report by the left-leaning Institute for Public Policy Research. The report says there have been 11 different economic strategies over the last 13 years. Story by the Guardian here
5. The media industry is changing from a focus on growing subscribers to average revenue per user, according to an analysis by The Rebooting newsletter. This is due to a shift in the advertising market and the challenges of expanding the audience. You can read more here
And finally…
The consumer magazine Which? has done its annual review of the best mince pies and other important food products for Christmas. Apparently Co-op is the place to go. Co-op’s Irresistible Luxury Mince Pies have been rated as the best available in the UK while its Les Pionniers Champagne is also top for champagne. Marks & Spencer and Sainsbury’s were rated as the best for Christmas puddings. You can find the mince pie reviews here and a guide to other Christmas food here
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Best
Graham