Hotel Chocolat is in a bad way – but so are other chocolatiers

Over the course of Easter 2023, the UK was responsible for one in eight Easter-related chocolate launches, according to research from Mintel’s Global New Products Database (GNPD), while seasonal Easter chocolate products also saw a 19% rise over the past 12 months. Meanwhile, UK-based ‘free-from’ chocolate brand NOMO reported a “stellar” Easter, having achieved 45.6% value growth compared with the total market’s growth of 16.7% during the Christmas period. Chocolate is the poster child of this spring holiday, so it should go without saying that any and all chocolatiers would be raking in profits from this holiday, year after year. Yet, Hotel Chocolat’s recent disappointing profit guidance update cast doubt as to how other ethical chocolate retailers are weathering 2023. The group is unusual in being a grower of organic cacao in Saint Lucia, a manufacturer in Cambridgeshire, and owner of its extensive direct to consumer channels in the form of branded stores and websites. However, due to the retailer being unable to keep its shelves fully stocked, it experienced “lower than expected” sales over the key Easter holiday period. As a result, the group now anticipates to deliver an underlying marginal loss before tax for FY23, despite its cash generation remaining healthy and the group debt free. Knowing this, the company is in a position to survive this bad news, conceding that 2023 is a “transitional” year for the company anyway. Due to ongoing weakness in consumer sentiment and continuing inflationary pressures, other smaller, ethical chocolatiers do not benefit from the same safety cushions of Hotel Chocolat; Montezuma’s Chocolate fell and was subsequently rescued out of administration earlier this June by founders Helen and Simon Pattinson, who have rejoined the company as managing directors. Montezuma’s previous owner, the private equity firm Inverleigh, sold the chocolatier in a pre-pack deal after it was making losses. According to the most recently filed Companies House accounts, Montezuma’s made a pre-tax loss of £1.1m for the year ended 31 May 2021 despite a 19% jump in revenues to £8.1m as a result of the high-cost burden and a lower margin on rising online sales during Covid. This seems to show that, no matter how much consumers spend on products, supply chain issues keeping stock limited and the current state of inflation and operational expenses are crippling business growth. Chocolate artisan Discover Chocolate has a statement on the front page of its website, stating: “Dear valued customers, we would like to apologise for the recent shortage of our chocolate bars. Unfortunately, due to an issue in our production and supply chain, we have been unable to maintain our usual level of stock, and many of you have been unable to purchase your favourite chocolate bars. “We know how much our chocolate bars mean to our customers, and we understand how frustrating it can be when we are out of stock. We would like to assure you that we are doing everything we can to address the issue and get our chocolate bars back on the shelves as soon as possible.” While Discover Chocolate is not in any real danger (that we know of), the public statement apologising for lack of stock is worrying. Fortissimo Chocolates, which traded as The Raw Chocolate Company and Conscious Chocolate, was also sold off to Adar Chocolates earlier this year, as the impact of Covid-19 combined with rising inflation and cost-of-living crisis led to a reduction in the company’s sales. However, prior to the pandemic, Fortissimo was trading successfully after a merger of two separate operations in 2018. These stories of chocolatiers falling into administration right after Covid, as well as low profit guidances from bigger companies, are not unusual post-Covid among retailers that are considered “non-essential”.