UK premium chocolate firm Thorntons has restored sales growth in its second quarter trading update as its focus shift from own-stores to commercial sales pays dividends.
The company’s renewed focus on UK commercial sales as well as private label and international growth helped the firm’s sales grow 5.4% to £88m ($141m) compared to the same period last year.
Thorntons began the process of closing just under half of its 344 own-stores in 2011 to focus on growing the business in commercial channels and continued the process during the quarter.
The company’s UK commercial channel now accounts for 44% of sales compared to 34% in the same period last year.
Speaking to ConfectioneryNews.com today Thorntons CEO Jonathan Hart said: “The commercial channel will become the biggest”
Commenting on Thorntons strong Q2, Panmure Gordon & Co said in an analyst‘s note: “Overall, this is quite a contrast to last year, when Thorntons issued a profit warning before Christmas and a clear sign that its strategic plan to rebalance its sales towards Commercial and thereby restore its profitability to industry competitive returns is beginning to work.”
Analysts from Investec also noted encouraging signs in private label and international markets.
Although exports are still a small part of its business, Thorntons posted 69% growth in international markets.
Hart said the company was focusing on English-speaking markets such as Australia, South Africa, UAE and USA, with Australia and South Africa the fastest growing.
“We have been well received on our visit and received Christmas and Easter orders,” said Hart, adding that Thorntons was in discussion with Australian retailers for all-year-round products.
However, Hart emphasized that the focus was “getting the UK business in a fit state”.
The company manufactures products for international markets from its only factory in Derbyshire. It has said that it has no immediate plans to start manufacturing abroad as it has capacity to grow volumes by a third at its current plant.
Private label rebirth
The company also grew exponentially in private label by 704% as sales for contract manufacturing for third parties rose to £2.5m ($4m).
Thorntons stopped private label manufacturing in late 2010, but chose to start up again after being approached by retailers that respected the quality of Thorntons chocolate, said Hart.
Hewouldn’t name the retailers, but said they were firms similar to Marks and Spencer that only sold their own brand confectionery and not third party products.
“It [private label] has grown quite considerable during the year, but it is not a core part of our business,” said Hart, adding that Thornton’s main concern was its own brand.
Outlook and packaging overhaul
Asked for his 2013 outlook, Hart said: “We are not expecting the market to be any fitter. We are planning for the current economic climate to continue.”
He added that the company would resume its retail to commercial rebalancing strategy and start repackaging its products from Autumn/Fall.
“If you go in to one of our stores today, I don’t think it’s easy to shop. I’m not sure what our packaging is trying to communicate,” he said.
Hart said that the company would reduce its range and would repackage its products from scratch including considering new packaging materials to improve the presentation for consumers.