Hotel Chocolat has agreed a new strategic partnership in Japan, reigniting hopes of success in the country after the failure of a previous venture.
The AIM-listed group told investors on Tuesday its new deal with Tokyo-based Eat Creator Corporation will enable it to achieve its strategic ambitions with a partner offering ‘proven expertise, new capital and a natural alignment on brand values’.
Hotel Chocolat will hold 20 per cent equity in the newly established vehicle, which will house 21 branded stores ‘supported by a customer database of more than 200,000 registered Japanese users’.
Big in Japan: Hotel Chocolat is hoping its latest international foray proves more successful
Eat Creator tasks itself with ‘creating the next generation of food culture’, via 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 supply side know-how and proven expertise in food brand development for the Japanese consumer’, Hotel Chocolat said.
Hotel Chocolat’s Japanese revenues fell for a third successive year in 2022, as uncertainty driven by the outlook for Covid-19 restrictions prompted the group to abandon further investments in a separate joint venture project.
A restructuring process was then instituted in order to look for alternative funding sources, resulting in a £21.8million impairment provision for the firm.
The company also incurred a modest charge from abandoning investment in directly controlled operations in the US, which was also impacted by supply chain challenges.
This aided Hotel Chocolat swinging to a £9.4million loss for the 12 months ending 26 June, compared to a £3.7million profit the previous year.
Co-founder and CEO of Hotel Chocolat Angus Thirlwell said: ‘Our new partner is well equipped to optimise the brand’s potential for Japan, bringing proven expertise, new capital and a natural alignment on brand values.
‘We are looking forward to combining the ingredients of Eat Creator with the ingredients of Hotel Chocolat into a powerful recipe for our next chapter in Japan.’
Hotel Chocolat shares were up 2.9 per cent to 160p in early trading. They remain some way off their December 2021 peak of 532p.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: ‘Investors gave Hotel Chocolat’s latest foray into international expansion an initial cautious welcome, mindful of the effort and expenditure it takes to crack big overseas nuts like the Japanese and US markets.
‘The company is clearly hoping that the way its tie-up deal with Eat Creator Corporation is structured will give it more protection in a downturn. It will hold 20% equity in the newly established vehicle, and it will earn brand royalty revenues as part of the deal.
‘Hotel Chocolat needs a whiff of sweet success, following its failed previous venture into the market, which crumbled partly due to the effects of the pandemic. The Covid crisis hit the chocalatier hard, eating into profits and pushing the company into steep losses. Other expansion efforts into the American market have also disappointed, with the company pulling its direct-to-consumer offering, by closing its US website.
‘Overseas expansion is clearly viewed as the recipe for growth, but it has come at a significant cost, so the company is now pinning its hopes on lower risk strategy deals.’
