Hotel Chocolat has just been purchased by American snacking giant Mars for $661 million. It's a formidable figure -- and one that many industry experts argue is unnecessarily high. Mars' valuation of the upscale chocolatier was a cash offer of 375 pence per share, representative of a 170% per-share increase.
Since Hotel Chocolat opened its flagship store in North London in 2004, it has become the largest independent chocolate maker in Britain, expanding to 131 stores (124 in the U.K. plus outlets in Gibraltar and Ireland). Still, some experts doubt whether the company has a future beyond the English market. In fiscal 2022, company revenue dropped by 10%, demonstrating a loss of $7.7 million, despite having an online store.
The Mars deal is a smart move for Hotel Chocolat, as Mars could provide the U.K. company with a larger distribution platform than it could have achieved on its own. Indeed, Mars Snacking totes a massive brand portfolio including such iconic candies as M&Ms, Snickers, Skittles, Milky Way, 3 Musketeers, Dove, Twix, Starburst, and many more. The purchase has already increased Hotel Chocolat shares by 164%, raising the pre-bid price per share from $1.72 to roughly $4.50. Hotel Chocolat co-founders Angus Thirlwell and Peter Harris will each receive roughly $157 million from the sale. Thirlwell is staying on as CEO under Mars for five years and investing 80% of his payout back into the company. If all goes to plan, the deal will be finalized by the end of January 2024.
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Going Global - For Better Or Worse
Whether or not this is a good move for Mars remains to be seen. Thirlwell cites supply chain issues as the primary reason Hotel Chocolat hasn't expanded to the international market already, in a statement via The Guardian. But, that might not be the entire story. The U.K. brand has already tried and failed to find a fanbase in the U.S. market, shuttering five American stores and taking a $4.3 million hit. Earlier this year, Chocolat joined forces with Tokyo's Eat Creator Corporation to open 21 new shops in Japan but hasn't been able to execute the plan due to funding issues. The deal followed another costly failed partnership with Chris Horobin, the former leader of QVC Japan. So far, the company has exhibited limited future growth potential in the U.K., but this boutique scope could change under Mars' ownership.
Some local foodies are lamenting the demise of another England-based company bought out by a large American food manufacturer. In 2021, the number of U.K. companies taken over by foreign firms hit a record high. Notably, U.S. Comcast bought the British Sky news outlet. Another U.S. private equity firm bought U.K. supermarket giant Morrisons. Some fans speculate that the quality of the product will decrease under the new large-brand ownership. But, global president of Mars snacking Andrew Clarke says the company has "absolutely no plans" to alter any of Hotel Chocolat's recipes following the purchase, via the BBC.
Read the original article on Tasting Table.