Lessons from a Chocolate Empire

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Even if we took a literary interpretation of the recommended climate, cocoa grows very well in Malawi. And if we consider that there are other countries whose area does not fall into this recommended climate, who are in fact Cocoa growers, it’s almost bonkers that with a crop that has a good worldwide market, few Africans countries (with the exception of Ivory Coast and Ghana)  have seriously ventured into growing it on a commercial scale. The market, according to MarketsandMarkets was worth $83.2 billion in 2010, and is set to grow to $98.3 billion by 2016. If you then factor in Oils (Cocoa butter cosmetic products and the like), Drinks (Nestle’s Milo, Cadbury’s Hot chocolate and many others) suddenly one begins to see clearly why entering such a market may turn out to be a very good and wise decision indeed. While Tea prices have recently been hovering between 260 -370 cents/kg on the world market (see index mundi here), Cocoa pulls in an incredible $229.45/kg! (April 2013 prices according to Ycharts.com here).

In order to consider the market opportunities in this area, a simple example may be appropriate.

Hotel Chocolat is a brand driven business that has grown to a £60 million turnover business in  20 years.  That may sound like ordinary, but it’s not.  Thorntons took over 60 years to hit comparable figures.

Hotel Chocolat engages in the production and distribution of chocolates for most occasions.  It offers chocolate gifts including dark chocolates, milk chocolates, white chocolates, caramel chocolates, chocolate truffles, fruit chocolates, and nut chocolates. The company sells its products through stores in the United Kingdom, the United States, Bahrain, Dubai, and Kuwait, as well as online. Hotel Chocolat Ltd. was formerly known as ChocExpress Limited and changed its name to Hotel Chocolat Ltd in May 2003.

Noteworthy facts & trivia:-

1. They have registered several trademarks in key markets to protect their valuable brand.

2. They have a Chocolate Tasting Club, launched in 1998 that has over 100,000 members which has trialled over 1,500 different recipes. Further, Hotel Chocolat runs a very successful chocolate bond scheme, obtaining loans (typically £2,000 or £4,000 that can be redeemed in full in 3 years) from its customers in exchange for bi-monthly interest payments of chocolate :-) .  The money is used to help grow the business (international expansion, and expansion of its innovative chocolate lines). So successful has this bond scheme been that it has raised over £5m.

3. They own a chocolate plantation, Rabot Estate in St Lucia (West Indies  – a region at 14 degrees North of the Equator), at 140 acres. This gives them greater control on production cost and quality and establishes vertical integration in their business model. To cement this, they have a manufacturing facility in Huntingdon, they own a call centre and an e-commerce site.

4. They have a mail order catalogue, and their store in Boston, Massachusetts has a “tasting room”.

5. As if this weren’t enough, they also own an award-winning hotel in St Lucia, including a Chocolate themed restaurant. (More about the extraordinary experience visitors to the hotel can indulge in here)

6. Although the company’s roots go back over 20 years ago, Hotel Chocolat’s first store opened in Watford only in 2003

7. Add in some humour:- the company’s co-founder’s was quoted saying he felt like asking HMRC to take ‘tax payments’ in chocolate when the tax-man claimed the company should pay tax on their innovative ‘chocolate bond’ scheme!

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