Hotel Chocolat talks about ‘direct marketing skills’ as profits soar

Hotel Chocolat claims to be scaling up to become a “globally ambitious” digital brand, with its direct-to-consumer multi-channel model accelerating in the UK.

The chocolate maker credits its “brand appeal and direct marketing skills” with attracting more than 600,000 new customers during the year, a 38% increase that brings the customer database assets in the UK at 2.3 million.

Revenue jumped 40% year-on-year to £142.9m in the 26 weeks to December 26, 2021, up 56% on pre-Covid levels. Hotel Chocolat also recorded a pre-tax profit of £24.1m, an increase of 56% year on year and 61% on the pre-pandemic period.

UK and rest of the world sales reached £139.7m in the period, up 39% year-on-year, while US sales rose 120% to 2m of pounds sterling. The business also had revenue of £5m with its Japanese joint venture, up 131% year-on-year.

In the UK, multi-channel sales are up 24% from pre-Covid levels. Describing its UK stores as a cost-effective way to build brand awareness, Hotel Chocolat says it is fully committed to brick-and-mortar locations as a “powerful way” to recruit profitable multi-channel customers. During the period, the company opened two new stores in the UK and moved four to much larger sites.

The past two years have been a time of very significant change both globally and within the company.

Angus Thirlwell, Chocolate Hotel

The company credits its best-selling refreshed Christmas and basic gift lines for driving “strong sales increases,” while digital investments and loyalty have helped drive multi-channel growth. During the period, Hotel Chocolat also invested in its first TV campaign, promoting its Velvetiser hot chocolate product.

While internationally the company has yet to achieve overall profitability in the United States and Japan, Hotel Chocolat insists it has a “clear line of sight” on how to achieve it, with strategies and KPIs measuring its progress.

The digital orientation applied to the US market is paying off, with active customers up 119%. Online growth was driven by sales of the Velvetiser product, a model the company says supports acquisition marketing with cross-selling gifting opportunities. Hotel Chocolat also notes the possibility of presenting American customers with a curated online offer of higher priced products.

Hotel Chocolat catalog revealed as the most effective Christmas direct mail

In terms of physical retail in the United States, the company decided to close three of its four stores, located in suburban locations, to focus on e-commerce.

During the period, Hotel Chocolat opened nine more stores in Japan and now markets from 31 locations, as well as online and wholesale. VIP Me’s active Japanese customers grew by 1,000%, with the company describing the overall growth in customer loyalty as a payback for its “investments and belief” in the importance of authenticity.

Overall, consumer sales in the Japanese market increased by 131%, with locally personalized gift assortments performing well.

DTC and passthrough

CEO Angus Thirlwell describes the sales success as signaling the “global strength” of the DTC brand and business model, results that have helped Hotel Chocolat recruit for roles in technology and multi-channel retail.

Rather than selling through grocers, the brand believes its “huge advantage” is knowing who its customers are and developing close direct relationships through DTC sales. These relationships allow Hotel Chocolat to analyze the behaviors of a “large church” of customer cohorts and adapt its marketing accordingly.

The process seems to pay off. Last month, Marketing Week revealed that the chocolatier’s catalog was the most effective Christmas direct mailer, according to Kantar’s “The Works” study.

Hotel Chocolat’s Christmas catalog proved to be the most successful festive mailing. Source: Hotel Chocolate

Conducted in association with Marketing Week and the Advertising Association’s Trust Working Group, ‘The Works’ study asked 750 consumers what they thought of five of December’s top direct mail ads – 150 consumers per ad.

The Hotel Chocolat catalog ranked in the top 2% of all ads in the UK for its level of persuasion, which translated into high purchase intent. Some 44% of attendees said they would use the coupon in the Hotel Chocolat catalog, rising to 90% among existing customers. Almost half (45%) said they would visit the brand’s website (up to 95% among customers) and 37% said they would visit a Hotel Chocolat store (up to 90%).

The brand says all of its channels are focused on building the active customer base, while stores are a “prolific medium” for recruiting and retaining multi-channel customers. Wholesale partnerships are used as an opportunity to advertise the brand to “discreet customer groups” using tightly organized ranges.

The company identifies a combination of “compelling” product lines and data-driven marketing as helping to drive growth, with Thirlwell promising an “unprecedented pipeline” of new product launches to come. The company acknowledges that continued innovation has fueled success, with renewed gift assortments contributing to “strong sales”, alongside the expanded hot chocolate and home barista line.

“The past two years have been a time of very significant change both globally and within the business, as we have evolved from a UK store-led brand to an ambitious global digital brand. with a wide range of luxury cocoa products,” says Thirlwell.

“The team has successfully adapted to an ever-changing landscape and we have remained focused on our opportunities, delivering a sustained acceleration in growth over the past 18 months.”

With the goal of becoming one of the world’s leading premium DTC chocolate brands, Hotel Chocolat envisions “exciting opportunities” for multi-channel, global growth. The company says it also wants to “continuously strengthen” its brand appeal through product innovation and improving ESG credentials.

William L. Hart