Hotel Chocolat agrees partnership to open stores in Japan

Hotel Chocolat has agreed on a new strategic partnership in Japan, rekindling hopes for success in the country after the failure of a previous venture.

The AIM-listed group told investors on Tuesday that the new deal with Tokyo-based Eat Creator Corporation will enable it to achieve its strategic ambitions with a partner that offers “proven expertise, fresh capital and a natural alignment with brand values.”

Hotel Chocolat will hold 20 percent of the shares in the newly created vehicle, which will house 21 brand stores “supported by a customer base of more than 200,000 registered Japanese users.”

Eat Creator is committed to ‘creating the next generation of food culture’, through food-based content and operating systems with various partners.

Current Eat Creator concepts in Tokyo include Neki, Social Kitchen, Unis, BANK kabutocho, Songbook, Teal and Ease.

The group will provide the joint venture with growth capital, new know-how on the supply side and proven expertise in developing food brands for the Japanese consumer.

Hotel Chocolat’s Japanese revenues declined for a third consecutive year in 2022 as uncertainty related to the outlook for Covid-19 restrictions led the group to forgo further investment in a separate joint venture project.

Subsequently, a restructuring process was initiated to look for alternative sources of funding, resulting in a £21.8 million impairment provision for the company.

The company also suffered a modest burden from forgoing investments in directly controlled US operations, which were also impacted by supply chain issues.

As a result, Hotel Chocolat recorded a loss of £9.4m for the 12 months ended 26 June, compared to a profit of £3.7m last year.

Hotel Chocolat co-founder and CEO Angus Thirlwell said: ‘Our new partner is well equipped to maximize brand potential for Japan, with proven expertise, fresh capital and a natural alignment with brand values.

“We look forward to combining Eat Creator ingredients with Hotel Chocolat ingredients into a powerful recipe for our next chapter in Japan.”

Hotel Chocolat Stocks were up 2.9 percent in early trading to 160 pence. They remain a long way from their peak of 532p in December 2021.

Susannah Streeter, senior investment and market analyst at Hargreaves Lansdown, said: “Investors welcomed Hotel Chocolat’s latest foray into international expansion cautiously at first, recognizing the effort and expenditure required to crack big overseas nuts such as the Japanese and US markets. .

“The company clearly hopes that the way the agreement with Eat Creator Corporation is structured will provide it with more protection during a downturn. It will hold 20% equity in the newly created vehicle and earn brand royalty income as part of the deal.

Hotel Chocolat needs a touch of sweet success after its failed previous venture into the market, which partly crumbled due to the effects of the pandemic. The Covid crisis hit the chocalatier hard, eating away at profits and pushing the company into big losses. Other expansion efforts in the US market have also disappointed, with the company withdrawing its direct-to-consumer offering by closing its US website.

“Overseas expansion is clearly seen as the recipe for growth, but it has come at a significant cost, so the company is now pinning its hopes on lower-risk strategic deals.”