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Table of Contents

1. Introduction: ........................................................................................................................................................ 3

2. Current state of Hotel Chocolat: ................................................................................................................... 3

3. Strategies for the future: ................................................................................................................................. 4

4. Conclusion ............................................................................................................................................................ 6

Appendix 1: Business Model of Hotel Chocolat .............................................................................................. 8

References: ................................................................................................................................................................. 10

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1. Introduction: Hotel Chocolat is a British chocolate producer and cocoa grower that opened its first shop in

London 2004. Angus Thirlwell and Peter Harris are the creators of Hotel Chocolat, with the

main core values: Originality, Authenticity & Ethics (Hope, 2014). The company has its own

cocoa plantation in Saint Lucia, which make its products with more cocoa and consequently

healthier (Hotelchocolat.com, 2015). With more than 80 shops in the UK, 3 in Denmark,

Australia and 3 in Middle East, Hotel Chocolate profit was £8.3m in the last six months

(Neville, 2015; Thompson, 2010). Even though selling high end chocolate is an expanding

market, the company focuses on diversifying its activities. As the name mention, the company

has its own hotel “Boucan” in Saint Lucia, including a spa and a restaurant. Furthermore, the

company has its own restaurant in London and Leeds, as well as a cafe in London. Different

beauty products are also offered as well as a Tasting Club for the members

(Hotelchocolat.com, 2015). This report will explore the current state of Hotel Chocolat, then

will demonstrate the possible strategies to grow internationally and enhance their strategic

performance.

2. Current state of Hotel Chocolat: One of the strengths of Hotel Chocolat (HC), besides owning its cocoa plantation, is the

originality and authenticity of its products by creating the chocolate recipes and even making

chocolate fresh from the bean in the cafes (Hotelchocolat.com, 2015). It provides creative way

to raise money, by offering bonds to its members of the Tasting Club, where the funds are

used to expand the company’s factory in Cambridgeshire, creating up to 250 new jobs,

opening new retail outlets and building a sustainable factory at its existing cocoa plantation in

Saint Lucia (Hurley, 2010). Furthermore, HC maintain a close relationship with its customers,

where members can taste monthly the new products in the Tasting Club, as well as offering

offering different dietary option (e.g. vegan, gluten-free, diabetic, vegetarian…), and also the

100% Happiness Guarantee option where unhappy customers can either get an exchange or

refund (Hotelchocolat.com, 2015). Since HC target mainly high street by selling in its own

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retail stores only, there is a lack of high street presence in most small cities, which could be a

weakness as the company may lose some potential clients. Furthermore, according to

Thorntons (2014) HC is considered the lowest in the consideration for gifting based on

customers feedback, which could impact HC sales as well as brand image. Lastly, even if the

company’s profits are increasing comparing with its competitors, feeding the demand for

artisan chocolates, the market share of HC is still relatively low in the whole confectionery

market in UK (Neville, 2015; Mintel, 2014).

HC core competency remains from the growth of cocoa in St Lucia plantation, The Rabot

Estate, and to the clear ethical work policies in Ghana (Figaro Digital, 2015). HC ensures to

offer a special chocolate experience and being ethical at the same time. The keen eye for

originality and innovation has led Hotel Chocolat the titles, number one in The Times ‘Fast

Track 100’, Retail Week ‘Emerging Retailer of the Year’ and one of the UK’s prestigious ‘Cool

Brands’ for 2007 (Figaro Digital, 2015). HC exclusive competitive advantage is the integration

of their physical stores with their website, so that customers have the same experience in the

restaurant, cafes, hotel or the shops, as well as offering a luxurious cocoa experience (Red

Technology, 2013). Furthermore, HC has recently opened its online shop internationally by

delivering to US and some countries in Europe where customers can consider gifting option,

check stock of items, order online and collect in store. This feature has improved HC’s

revenues by 37% in 2013 (Red Technology, 2013). From our presentation one of the

challenges that HC faces, is the poor brand awareness that might affect the company’s sales

and brand image, as a result advertisement and high end hotel presence as well as corporate

gifting, could be considered to improve the brand visibility as a future strategy.

3. Strategies for the future: Chocolate remains an important part of Britain’s diets, consumed by nine in 10 people, with

30% of people eating it at least four times a week (Mintel, 2015). The chocolate market grew

by 1.6% in 2014 to just over £4.1 billion in UK, however negative publicity about sugar made

consumer more interested in high intense cocoa chocolate. Meanwhile, assortments that are

eaten during special occasions seem to have been insulated (Mintel, 2015).

After the success in the UK, Hotel Chocolat decided to expand and explore international

market. After opening some stores in the US, the strategy did not succeed, and the company

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had to pull out the stores from Boston and New Jersey, however the CEO claim still having

ambition for the US market, once the strategy will be reassessed (Neville, 2015). A successful

strategy establishes a difference that it can preserve from its competitors. It should deliver a

greater value or create a comparable value at a lower cost (Porter, 1996).

HC has the financial ability to go international as it is considered the “ethically engaged

company” in the luxurious chocolate industry with potential growth. In 2008 the company has

seen its sales soar at 226% (Fasttrack100, 2008), which show that the company has sufficient

resources to go international.

Hotel Chocolat strategy is to target key markets across Northern and Central Europe,

Americas and the Far East in order to resonate with local customers (Retail Gazette, 2013).

Since the luxurious company is already implemented in North of Europe, Denmark, the

expansion from neighbor countries is a suitable way to explore internationalisation, as

scandinavian countries have relatively similar taste, lifestyle and culture. As a result, Norway

has been chosen as a host country.

In order to evaluate Norway attractiveness for investment, some factors needs to be analysed:

economic, political and social factors.

As one of the Scandinavian countries, Norway is considered one of the highest consumers of

chocolate in Europe, with more than 9.8 Kg consumed annually per capita, it is the fourth

highest consumer after United Kingdom (CNN, 2012). Member of the EFTA (Europe and Free

Trade Association), it is known for its political instability, low unemployment rate, small

population and a very strong economy. In addition it is a relatively easy country to do

business in (Invinor, n.d; World Bank, 2014) which make it an attractive country to invest in.

Socially, even though Norway has a high living cost, it holds the second highest GDP per capita

in the world (Eurostat, 2014). United Kingdom and Norway have relatively similar culture,

and more alike to its neighbor Denmark. According to the Hofstede model (2015) United

Kingdom and Norway have both low power distance and high rate of individualism, in terms

of indulgence both countries have a high rate. Similarly with the Denmark, cultural factors are

relatively similar (The hofstede centre, 1997).

A notable desire for premium chocolate, along with frequent innovation, remained the main

trends in chocolate confectionery in Norway in 2014 (Euromonitor, 2014). The reason for this

trend is that chocolate confectionery is a highly mature category in Norway, predominantly

driven by high innovation. In addition, organic and fair trade chocolate became very popular

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recently. Organic chocolate confectionery grew by 39% over the 2009-2014 review period; a

clear indicator of the growing popularity of ethical chocolate (Euromonitor, 2014). Although

chocolate consumption is popular in Norway, the market is very competitive. The industry is

ruled by rival brands from Belgium, Switzerland and France (RTS, 2009), so HC need to take

this into account before entering the new market. Even though private label holds a modest

position in the market (1% of the chocolate confectionery market), they are not driven on a

value for money basis; they tend to compete predominantly by emphasising their superior

quality with luxurious packaging. Compared with standard and economy brands, these

premium products offer more exotic flavours, and often have a higher cocoa content

(Euromonitor, 2014). Consequently, confectionery is largely seen as a treat rather than a

necessity, so consumers are more prepared to pay for a premium branded product, especially

for gifts (Food & Drink, 2003).

As a first step to internationalisation, the quickest and efficient way to penetrate a new

market is through exporting. It is recommended for HC to choose exporting as a short term

strategy, as the level of commitment and risk is low. In addition the investment of managerial

and financial resources is relatively low compared with other modes of entry. It is also mostly

chosen by small and medium companies because of the limited amount of resources that they

have (Bradley, 2005) and this is perfectly suitable for the HC that consider itself as a startup

company that wants to expand and at the same time minimising risk. Moreover, in the long

term, after implementing the exporting strategy and once HC got more familiar with the local

market and the customers get accustomed to the brand image and its products, the company

could develop its strategy to a franchising. As the company will already be implemented in

Norway, it will be easy to build trust with the franchisee. Furthermore, developing a franchise

will help expand in a new market with a limited risk, low capital involvement and at the same

time adapting the product to the local culture, in case any differences are noticed (Muhlbacher

et al, 2006).

4. Conclusion This report analysed the possible strategies for Hotel Chocolat to grow internationally. The

strenghts and weaknesses of the company have been analysed. The chocolate company has

already express its interest to explore foreign market by developing its strategy in Europe,

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Australia and Middle East, however within the European market, Norway has been chosen as

a host country.

Finally, Exporting and Franchising has been suggested as the most suitable way to enter the

Nowegian market.

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Appendix 1: Business Model of Hotel Chocolat

Partner network:

- John Lewis

- Airport

- Raw material

suppliers

Key activities:

- Shops (online, high street,

John Lewis, airport)

- Hotel

- Restaurant and cafes

- Produce chocolate and

other products

- Cocoa plantation

- Innovation of product

design

- Chocolate tasting club

- Chocolate school

- Chocolate bonds

Offer:

- Chocolate, hot

chocolate,

cooking

chocolate

- Gifts

- Cuisine items

- Wines

- Restaurant and

cafes

- Boutique hotel

(spa, restaurant)

- Luxury

products (giant

chocolate slabs)

- Chocolate

bonds

- Chocolate

School

Customer relationships:

Customer acquisition:

- tasting in physical store

- Bonds

- Free magazines

- Gift Card

Customer retention:

- membership (newsletter)

- Discount

- Tasting club

- Bonds

- Luxury service

- Boosting sales:

- Exclusive gift offers

- Exposure to other Hotel

Chocolat products (beauty

products, accommodation)

- Wines

Customer segments:

- Guests who wants a

personal and special

shopping experience

- Gifts purchasers

- Chocolate Fans

Key resources:

- Cocoa plantation

- Stores (4 types)

- Creative director

- Fonder

- Marketing department

Distribution and channels:

- Shops (online, high street, John

Lewis, airport)

- Hotel

- Restaurants and cafes

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As explained in the presentation as well as from the table above, Hotel Chocolat offers a wide

range of activities from the restaurant to the chocolate school and this is considered as

strength as it is different ways to generate revenues. Moreover, the company aim to maintain

a great customer relationship as different ways to acquire and retain customers are presented

such as bonds, tasting club etc., however the customer segments and the distribution channels

are limited. The main channel that the company focuses on is opening its own shops, because

it offers an exclusive experience for chocolate fans as well as customers looking for a special

treat or gift. The customers can have a one to one interaction with the staff members, as they

can receive advice for any gift option as well as taste different samples in store, this

interaction help build a trust and a connection between the client and the product that will

help the company’s brand image.

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